jmu_cover
21/4/08
16:47
Page 2
Blackfriars Advice Centre
Southwark Credit Union
Linking credit
unions and
money advice
The Blackfriars Advice Centre,
Southwark Credit Union and Twinpier financial
inclusion partnership project 2006
Paul A Jones
Liverpool John Moores University
May 2008
jmu_cover
21/4/08
16:47
Page 3
Linking
credit unions and
money advice
A research report on the Blackfriars Advice Centre,
Southwark Credit Union and Twinpier
financial inclusion partnership Project 2006
Paul A Jones
Research Unit for Financial Inclusion
Faculty of Health and Applied Social Sciences
Liverpool John Moores University
May 2008
Published by Faculty of Health and Applied Social Sciences, LJMU
© Faculty of Health and Applied Social Sciences, LJMU, 2008
ISBN 978-0-9553997-9-4
British Library Cataloguing in Publication Data
A catalogue record for this report is available from the British Library
The Friends Provident Foundation research project is
based on the Southwark Credit Union money advice project
funded and supported by:-
jmu_64p
21/4/08
16:48
Page 1
Blackfriars Advice Centre
Linking credit
unions and
money advice
The Blackfriars Advice Centre,
Southwark Credit Union and Twinpier financial
inclusion partnership project 2006
Paul A Jones
Liverpool John Moores University
May 2008
jmu_64p
21/4/08
16:48
Page 2
jmu_64p
21/4/08
16:48
Page 3
Contents
Foreword
5
Acknowledgements
6
Executive Summary
7
1. Introduction
12
2. The Southwark Credit Union Money Advice Project
14
3. The partners
16
Blackfriars Advice Centre
16
Southwark Credit Union
17
Twinpier Debt Management Agency
18
4. The Blackfriars Advice Centre Financial Inclusion Research Project
20
5. The achievements of the Money Advice Project
21
The beneficiaries
21
The participating organisations
30
6. Research findings
33
Establishing a vision and purpose
33
Managing referrals
35
Staff induction and training
49
Organisational capacity
51
Developing a strategic approach
54
Managing partnership working
55
Overcoming barriers
56
7. Conclusions
59
References
60
Appendix 1
63
Developing a partnership – a checklist for credit unions
and money advice agencies
jmu_64p
21/4/08
16:48
Page 4
jmu_64p
21/4/08
16:48
Page 5
Foreword
My involvement with the project described in this report dates back to 2005, when as a policy
and fundraising officer employed by Blackfriars Advice Centre (BAC), I submitted an
application to the Friends Provident Foundation to evaluate the partnership initiative being
carried out by BAC and Southwark Credit Union, which was supported by Barclays.
In 2005, joint projects of this nature were neither as prominent nor as prevalent as they are
today, although the potential added value of such partnership approaches appeared to be
self-evident. With the benefit of the valuable hindsight provided by this report and the
experiences of other similar initiatives it is clear that such optimism was not misplaced.
However, as the report’s findings demonstrate, it is crucial that simplistic assumptions should
not be made regarding the ease with which arrangements between advice agencies and
credit unions can be implemented that will effectively challenge the various aspects of
clients’/members’ financial exclusion.
The report highlights some key learning points for all organisations considering joint work in
this field. In particular, it should be borne in mind that although advice agencies and credit
unions share a commitment to promoting financial inclusion, they are substantially different
entities with distinct attitudes to credit, debt, and borrowing.
It is a truism that good research should involve an objective, fair and fearless assessment
of the subject being investigated. This report fully meets that description, and I am
confident that the core aspiration underpinning the work, namely to use an individual case
study to promote good practice across the piece, will be achieved. I would commend this
report to all those who share a commitment to tackling the corrosive effects of debt and
financial exclusion.
Finally, I would like to record my thanks to the late John Walsh, erstwhile director of BAC,
erstwhile colleague and personal friend, for his support for this research project.
Jim Fearnley • Head of Research and Policy • Money Advice Trust
5
jmu_64p
21/4/08
16:48
Page 6
Acknowledgements
The Blackfriars Advice Centre (BAC) financial inclusion research project was initiated by Jim
Fearnley, the then policy and fundraising officer at BAC and now the head of research and policy
at the Money Advice Trust, and by Tina Barnes, the then business development manager of
Southwark Credit Union Ltd. now the BERR1 Financial Inclusion Fund programme manager at
Citizens Advice. The author would like to thank Jim and Tina for their advice and ongoing support
in the analysis of research data and for their contribution to the writing of this report.
Equally, he would like to thank all the people who participated in the project research, especially
Kathy Wade, Christina Meacham and Vernica Massiah at BAC and Lakshman (Lucky)
Chandrasekera, Joan Driscoll and Moji Oludairo at Southwark Credit Union and Chris Ledger, the
manager of Twinpier Debt Management Agency.
The author would especially like to acknowledge the contribution of John Walsh, director of BAC,
who tragically fell ill and died during the period of the project. John took over responsibility for
the project after Jim Fearnley had moved to the Money Advice Trust and he enabled its successful
continuation.
Special thanks go to all the beneficiaries of the project who participated in interviews and
discussions and to advice agency and credit union personnel throughout the country who
contributed ideas and reflections.
Particular thanks go to the Friends Provident Foundation for funding the research project and to
Danielle Walker Palmour, director of the Friends Provident Foundation, for her continued support
for the project. Also, thanks to Barclays for funding the Money Advice Project on which the
research is based and to Jenna Eastlake, Senior Financial Inclusion Manager at Barclays, for her
assistance in the dissemination of research findings.
Special thanks also to Claire Brady, Manager of the ABCUL / Citizens Advice CONNECT Project,
who, subsequent to the termination of the money advice project, contributed significantly to this
report. Thanks too to Nick Pearson, National Money Advice Coordinator at adviceUK, who
commented in detail on certain sections of the text.
Thanks also to the following people who contributed to the seminar held, with the research team,
at Friends Provident’s office in London, in December 2006:Mark Lyonette, CEO, Association of British Credit Unions Ltd
John Mulligan, Grants Manager, Esmeé Fairbairn Foundation
Shlomo Levi, Director of Welfare Rights Support Services, London Advice Services Alliance
Andrew Matheson, Partnership and Policy Manager, Social Regeneration Unit, Southwark Council
The research team on the project consisted of Simon Rahilly and Paul A. Jones, of the
Research Unit for Financial Inclusion in the Faculty of Health and Applied Social Sciences at
Liverpool John Moores University. The report was written by Paul A. Jones.
The opinions, ideas and recommendations contained in this report are that of the author. They do
not necessarily reflect those of Blackfriars Advice Centre, Southwark Credit Union or Twinpier
Debt Management Agency.
1 BERR = the Department for Business Enterprise and Regulatory Reform.
6
jmu_64p
21/4/08
16:48
Page 7
Executive Summary
The Southwark Credit Union Money Advice Project (SCU-MAP) ran from November 2005 to
November 2006. It offered a co-ordinated financial service to the people of Southwark by
linking access to affordable financial services with the provision of money advice, aimed
primarily at income maximisation and debt counselling. The project involved three partners,
Southwark Credit Union Ltd. (SCU), Blackfriars Advice Centre (BAC) and Twinpier Debt
Management Agency.
The following are the key areas of learning arising from the project:1. Establishing a vision and purpose
The money advice
project arose out of a
vision of linking up
credit union and advice
agency services in order
to provide a pathway to
financial inclusion and
stability.
The money advice project arose out of a vision of linking up credit union and money and
debt advice agency services 2 in order to provide a pathway to financial stability,
particularly for those experiencing financial exclusion. It was clear that this vision has to
be communicated and owned at all levels throughout participating organisations if credit
unions and advice agencies are to work successfully together.
However, it was evident that generating a common vision and purpose can be
challenging. A shared commitment to promoting financial inclusion can still mask
differing underlying organisational assumptions, beliefs, perspectives and interests.
The expectations and concerns of all staff involved in joint working have to be recognised,
explored and, if possible, resolved at the outset. Moreover, a shared sense of direction and
purpose does not necessarily entail full agreement on every issue and detail; but rather,
it should be based on a mutual recognition and acceptance of differing perspectives
within the wider context of working together. In practice, expectations and concerns will
have to be revisited continually through the life of any partnership project.
2. Managing referrals
At the heart of partnership working is the management of the process of referrals from the
credit union to the advice agency, and vice versa. Partnership success depends on robust
referral practices and agreed, preferably written, procedures.
Referrals made by credit unions to advice agencies:
• The project revealed the importance of making appropriate referrals to advice
agencies. Some form of credit union filter or assessment system is needed if people are
to be directed to the advice or support they need.
• Credit unions can sometimes fail to refer people who would have benefited from
money or debt advice. Staff need to be able to identify the triggers that suggest a
member could benefit from money or debt advice.
• Not every financial problem or difficulty requires a referral to an advice agency. There
were examples of credit union staff supplying basic information that enabled
members to make financial decisions without the need for referral.
2 BAC offers a money and debt advice service. Debt advice enables people in debt to explore and access various means of
resolving their debt problems, whilst money advice is primarily concerned with income maximisation and assisting with the
various financial problems clients may have. In distinction to debt and money advice, generic financial advice or money guidance
(HMT 2008) is understood as a “set of services and tools that use information about individuals’ circumstances to help them to
identify and understand their financial position and their needs and to plan their finances accordingly”(FSA 2004, 2005)
Typically, money guidance will include money management and budgeting, advice on savings, investments and borrowing and
on longer term financial planning. In practice, however, there can be some blurring of boundaries among these definitions.
7
jmu_64p
21/4/08
16:48
Page 8
• There is a need for preparatory support in a credit union before the member and
potential advice client attends an interview at an advice agency, in order to reassure
the referred person and provide information about the referral process and what type
of service to expect from the advice agency. In some cases, such preparatory support
may even include a support worker accompanying a referred person to the advice
agency.
• Efficiency in the making of advice agency referrals and appointments is critical to
success. Despite the misgivings of some advisers, a priority referral system does enable
a seamless service to be offered to a person in difficulty. In some credit unions, staff
have access to advice agency appointment booking systems in order to enhance
prompt and efficient referrals.
A shared sense of
direction and purpose is
based on a mutual
acceptance of differing
perspectives.
• There was evidence that some people preferred the telephone advice service offered
through Twinpier rather than the face-to-face service offered by BAC. This preference
was often expressed in terms of the immediacy, accessibility and anonymity of a
telephone service. Others considered face-to-face advice to be more appropriate.
Face-to-face advice was recommended mostly to people with larger and more complex
debts. Having both options available was seen as important to the development of a
flexible and holistic approach.
• Feedback on the quality and outcome of referrals from advice agencies was seen as
important so that credit unions could offer a co-ordinated and supportive service to
members. Feedback is dependent on obtaining member agreement that would allow
data-sharing between the credit union and advice agency.
Referrals made by advice agencies to credit unions
Debt/money advisers differ in their approach to making referrals to credit unions. Some,
as at BAC, take a cautious view and consider that they can only inform clients of the
option of joining a credit union as one choice among many, and can therefore only give
information about where to find out further details. Other advisers take a different view
and proactively encourage clients to open credit union accounts as a key element in a
longer-term approach to debt management and combating financial exclusion.
Advisers appear to take a cautious approach to referrals to credit unions for four main
reasons. These are:• Possible contravention of financial promotions legislation – credit union savings and
current accounts are covered by financial promotions legislation, and an adviser who
makes a recommendation to join a credit union technically enters a legal grey area.
However, Government stresses that advice agencies ought to act in the best interests
of their clients and, with some basic safeguards, ought to avoid being so over-cautious
in their approach to the financial promotions regime that financially excluded people
lose out on access to affordable financial services.
• Compromising agency independence through links with a financial institution – for all
agencies, independence is fundamental to service delivery. However, there are varying
interpretations of what independence means in practice. For some advisers,
independence entails maintaining a marked distance from credit unions altogether.
However, for others, it allows for joined-up service delivery so long as it is
acknowledged that, on occasion, an agency may have to act in the interests of a client
in a way that may be against the interests of the credit union.
• Recommending borrowing to get out of debt – it is axiomatic among many debt
advisers that overindebted clients should not take out additional loans, particularly in
an attempt to reduce existing debts. However, others argue that ruling out borrowing
8
jmu_64p
21/4/08
16:48
Page 9
altogether is too strong a position to take. There may be certain circumstances in
which settling or reducing a debt with a further loan may prove advantageous to the
client. In addition, sometimes people, even if overindebted, still depend on further
credit to cope with emergencies or to manage the household budget.
• Holding current, savings and loan accounts with a single banking services provider some advisers questioned the wisdom of low-income clients saving, borrowing and
having wages or benefits paid into an account in the same financial institution. There
was a concern that if clients had all their funds in a credit union and, for whatever reason,
defaulted on a loan, then the income on which they depended to live may be at risk.
In research discussions, it emerged that, where advice agencies take a more proactive
approach to recommending credit unions to their clients, a different set of concerns can
emerge. In such situations, these concerns are those of credit unions and relate to:-
Partnership training and
induction for staff are
essential to success.
• Client expectations - advice agencies can sometimes give clients unrealistic
expectations of the assistance that can be afforded them by a credit union.
• Credit union independence – advice agencies can also sometimes give their clients the
impression that a credit union will automatically offer them a loan. It has to be
recognised that credit unions are independent financial organisations that have to
take full responsibility for assessing loan applications and making loan decisions.
• Credit unions as co-operative businesses – a credit union is a co-operative and mutual
financial institution established to serve its members. It is not a charity. Advice
agencies need to ensure that the people they recommend to a credit union for a loan
do have the full capacity to repay.
• Managing loan default – credit unions are concerned that advice agencies understand
the impact of loan default on the operation and long-term sustainability of a credit
union. An advice agency, in collaboration with the credit union, needs to agree an
effective policy regarding how to deal with referred clients who subsequently default
on loans to the credit union.
3. Staff induction and training
Induction and training for directors and staff members, both managerial and operational, on
the purpose, operation and demands of partnership working are essential to success.
Staff induction and training is required at three distinct levels:• The philosophical level – this involves an exploration of the underlying values,
principles and organisational culture that underpin advice agency and credit union
operations. It offers an opportunity to examine the complex and contested issues and
dilemmas that often arise for advisers and credit union staff when their respective
organisations connect in partnership programmes.
• The practical level – this refers to the practical policies and procedures through which
a linked service is delivered by advice agencies and credit unions. Induction and
training relate both to the referral process and other relevant operational systems and
also the range of services available at both the credit union and advice agency and
how these can be accessed.
• The specialist level – in some credit unions, staff are trained in debt and money advice,
not to replace the role of skilled advisers, but to enable them to identify debt issues
and make referrals appropriately. Having advice agency staff members who are
knowledgeable about credit union principles and operations can increase the
awareness of credit union issues throughout the organisation.
9
jmu_64p
21/4/08
16:48
Page 10
4. Organisational capacity
Partnership working to promote financial inclusion places demands on the organisational
capacity of credit unions and advice agencies. In relation to the present study, this issue
surfaced in four key areas:
• Advice agency capacity – BAC is an extremely busy advice agency, and since the
project ended, has lacked the capacity to prioritise credit union referrals. However, it is
clear that partnership working depends on some form of unmediated credit union
access to an agency’s appointments system.
A genuine solution to
financial exclusion
includes money and
debt advice, access to
affordable financial
services and financial
capability education.
• Credit union administration – the SCU-MAP project enabled the credit union to embed
money and debt advice into the credit administration process. It built on the existing
practice of referring members to telephone debt helplines through the employment of
a dedicated debt support worker. This worker was able to offer a personal support
service to overindebted members and assist them in accessing BAC services. However,
even though the value of this service was recognised, it was beyond the capacity of the
credit union to continue this service after the funded project terminated.
• Generic financial advice or money guidance – neither BAC nor the credit union offered
generic financial advice (FSA 2004, 2005) or money guidance (HMT 2008). The
service provided by BAC was a debt and money advice service, but did not move into
generic financial advice or money guidance as understood by the FSA (2004, 2005) or
Thoresen Review (HMT 2008). However, evidence from beneficiaries confirmed that
longer-term solutions to overindebtedness and financial exclusion depend upon
access to generic financial advice as well as to debt and money advice and to financial
services. Areas in which generic financial advice were sought by beneficiaries included
basic budgeting, making choices in the financial market, and information on saving
and current accounts.
• Financial capability education – the project also highlighted the need of beneficiaries
for financial literacy or financial capability education. It became clear during the
project evaluation process that a genuine solution to financial inclusion includes
money and debt advice, access to affordable financial services and financial capability
education. Developing financial capability was fundamental to enabling beneficiaries
to move on into financial stability.
5. Developing a strategy
The project highlighted the importance of developing a strategic planning process if credit
unions and advice agencies are to be enabled to work effectively in partnership. Ad hoc and
unplanned approaches limit what can be achieved. Credit unions and advice agencies need
to be able to formulate, on the basis of mutual understanding and transparency, clear action
plans that facilitate visible and unambiguous benefits for themselves, for other stakeholder
organisations and, importantly, for end-beneficiary credit union members and advice clients.
In some ways, the strategic possibilities of the project were compromised by its tendency to
focus primarily on debt advice and access to loans. A greater understanding of the importance
of savings, current accounts and insurance services in tackling financial exclusion would have
opened up the project, not just to debt advisers but to other generalist, housing and welfare
benefits advisers at BAC and therefore to many other end-user beneficiaries. Equally, at the
credit union, the focus on debt issues specifically resulted in less stress being placed on the
importance of income maximisation as part of the financial inclusion process.
Strategic development was also limited by a lack of clarity regarding the relationship
between overindebtedness and financial exclusion. In some ways, this constrained the
capacity of advisers to appreciate the implications of the financial inclusion agenda and,
10
jmu_64p
21/4/08
16:48
Page 11
equally, of credit union staff to appreciate how overindebted members could be served with
financial products and services, apart from loans, which would assist their move into financial
stability.
6. Managing partnership working
The SCU-MAP project and other similar initiatives suggest that successful partnership
working between money advice agencies and credit unions can be attained via the use of a
variety of organisational models and structures. These range from models based on strong
notions of mutual independence to those based on more fluid forms of interdependence.
Some models tend to be flexible and informal, whilst others are structured and formal. Project
analysis suggested that there is no right or wrong approach to partnership working, but that
each approach is forged in particular circumstances, dependent on the values, interests and
goals of the participating organisations.
The commitment of
the board or trustees
of participating
organisations to
However, reflections on the SCU-MAP project, and discussions with credit unions and advice
agencies elsewhere identified a series of elements that underpin success irrespective of which
model of partnership working is adopted. These are:• The commitment of the board or trustees of participating organisations to partnership
working.
partnership working
• The engagement of both senior and operational staff in the partnership.
is essential.
• A clear statement of the strategic direction, mission, goals and purpose of the
partnership in response to the defined needs of potential beneficiaries in a particular
locality.
• The identification of a named person responsible for partnership liaison in each
participating organisation.
• A clear definition of roles and responsibilities in written protocols, operational
procedures, service level agreements and terms of reference.
• The importance of prioritising the partnership in trustee, management and staff
training programmes, and in general, planning activities designed to market the
participating organisations.
• The acknowledgement and management of complex and contested issues in a way
that does not undermine the partnership and compromise the wider mission to
combat overindebtedness and promote financial inclusion.
7. Conclusion
The SCU-MAP project was a time-limited venture in a new and significant area of financial
inclusion policy and practice. It both succeeded in serving a group of beneficiaries and in
making a contribution to national thinking on good practice in credit union and advice
agency partnership working. Increasingly, new partnership initiatives are emerging based on
many of the learning points derived from the project.
Long-term solutions will inevitably depend on continuing external financial support, whether
from Government or the private sector. However, there was some evidence from this project
that existing, ‘silo-ed’, financial inclusion funding streams do not always promote effective
partnership working. Distinct funding streams support credit union development, debt advice,
generic financial advice and financial capability education. It is essential that all these
elements come together in a strategic and holistic manner.
11
jmu_64p
21/4/08
16:48
Page 12
1
Introduction
A considerable volume of research has been carried out into the diverse realities of life on a
low income, and has often focused on how poverty and financial exclusion are closely related
and mutually reinforcing (Kempson, 1996, 2002; Jones 2001; Collard et al., 2003; Collard and
Kempson 2005).
With no access to, or no usage of, the financial services that are taken for granted by most
consumers, many people on low incomes have no choice but to pay higher charges on
transaction services (Brown and Thomas 2005, Herbert and Hopwood Road 2006) and are
also vulnerable to high-cost sub-prime lenders.
Poverty and financial
exclusion are endemic
in Southwark, the
dynamics of which are
compounded by the
heterogeneous makeup
of the population.
Exclusion from financial services is often the result of poverty (Carbó et al. 2005) but it can
also lead to greater poverty and over-indebtedness. Moreover, deprived of money and debt
advice, people on low incomes are often in the position of making poor money management
decisions that compound and exacerbate financial disadvantage.
It was in order to tackle financial exclusion and the poverty that arises from overindebtedness
that the Southwark Credit Union Money Advice Project (SCU-MAP) was created by Blackfriars
Advice Centre (BAC) and Southwark Credit Union (SCU), in collaboration with the Twinpier
Debt Management Agency. It was a project designed to link up money and debt advice with
access to credit union financial services in order to provide a joined-up, holistic service to
people in financial difficulty. Its area of operation was the London Borough of Southwark,
currently the 19th (out of 354) most economically deprived boroughs in England and the sixth
most deprived in London (Noble et al. 2008).
Poverty and financial exclusion are endemic in Southwark, the dynamics of which are
compounded by the heterogeneous makeup of the population. Close to 40% of the
Southwark population are from a black or minority ethnic community, compared with a figure
of 29% across London as a whole. According to the 2001 census, 2% of people in the borough
are new immigrants. A significant number of people claim welfare benefits, with the largest
group of family claimants being lone parents. Children in Southwark are more likely to be
living in poverty than elsewhere in the UK (Southwark Council 2007).
Through its outreach programmes within low-income communities, SCU was increasingly
presented with people, already overindebted, either applying for further loans or coming to
the credit union for help. Unable to offer people professional money or debt advice, SCU
sought a new and innovative approach to integrating money and debt advice into the overall
service it offered the community. The credit union already had referral links with the Twinpier
telephone debt counselling service and often recommended people to contact the Consumer
Credit Counselling Service telephone helpline. But it did not have any strategic partnership
relationship with a money and debt advice agency that could be developed in the longer
term.
It was for this reason that SCU approached BAC to pilot a money advice project that would
enable the credit union to offer a money and debt advice service as part of its service
provision. It was proposed that this project would be mutually advantageous as it would also
offer the advice agency the opportunity of enabling its clients to access a pathway to financial
inclusion and stability through credit union membership. With the subsequent involvement of
Twinpier as the third partner, and the financial support of Barclays, the SCU-MAP project was
established as a twelve-month initiative.
12
jmu_64p
21/4/08
16:48
Page 13
It was never imagined that the development of a partnership project between a credit union
and an advice agency would be easy or straightforward. Given differences in organisational
culture and purpose, and inevitable strains on capacity, credit unions and advice agencies face
considerable challenges in forging effective working relationships in the interests of their
members and clients.
In order to explore the impact of the project and the dynamics of effective partnership
working, a research project was created to run alongside the money advice project. The aim
of this research project, commissioned by BAC and supported by the Friends Provident
Foundation, was to generate findings that would be of value to the wider credit union and
money advice sectors. In fact, the dynamics of partnership relationships were already high on
the credit union and money advice sectors’ national research agendas and the research
project was designed to inform national thinking on effective ways forward.
The SCU-MAP
evaluation was able to
generate a series of key
findings on partnership
working between credit
unions and money
advice agencies.
The SCU-MAP project, as is apparent in this report, had limited objectives, that for the most
part it was able to achieve, despite the number of beneficiaries assisted being less than
anticipated. However, it has to be recognised that the project was beset by organisational
difficulties and constraints, virtually from the outset. The key leaders of the project, at SCU
and BAC, both left to take up posts elsewhere, which impacted on the vision and direction of
the project. Then, the director at BAC who took over responsibility for the project, John Walsh,
tragically and suddenly took ill and died. This had a massive bearing on the organisation of
both the money advice and research projects, as BAC was obliged to prioritise the
maintenance and development of its core services.
Despite setbacks, however, the research project was able to generate a series of key findings
on the organisational management of partnership working between credit unions and money
advice agencies. Learning drawn directly from the experience of project participants,
beneficiaries and stakeholders, has been able to assist credit unions and money advice
agencies developing partnership working nationally 3.
SCU-MAP was led by SCU in partnership with BAC and Twinpier, whilst the financial inclusion
research project was led by BAC.
3 Findings from the research have informed, for example, the ABCUL and Citizens Advice national partnership programme,
CONNECT, linking credit unions and Citizens Advice Bureaux.
13
jmu_64p
21/4/08
16:48
Page 14
2
The Southwark Credit Union
Money Advice Project
SCU-MAP ran from November 2005 to November 2006. It aimed to strengthen SCU’s
informal connections with BAC and to build a more established relationship with the Twinpier
Debt Management Agency. Prior to the project, the credit union had realised that a new
approach was needed if the increasing numbers of financially excluded and overindebted
people approaching the credit union for help or for loans were to be assisted effectively.
The aim was to provide
a holistic financial
service by linking
together access to
affordable credit and
the provision of money
advice and debt
counselling.
Often a loan was not always in the best interest of such people and so the credit union needed
a means of being able to refer people on for money or debt advice. For this reason, SCU
approached BAC, and later Twinpier, to create SCU-MAP. The aim was to provide a holistic
financial service by linking together access to affordable credit and the provision of money
advice and debt counselling.
For SCU, SCU-MAP was integral to the strategic development of its services in Southwark.
At the start of the project, SCU was granting at least £3 million worth of new loans each year,
mostly to people on low and moderate incomes. Before the project, SCU was already referring
three or four members a month to money advice agencies. However, these referrals were not
trouble free. With the workload and stretched capacity of BAC, for example, it was not always
easy to secure appointments for people in need, and credit union follow-up on appointments
was often intermittent and unsatisfactory.
For SCU, the project would secure a guaranteed number of designated money advice
appointments at BAC, which would enable credit union-referred clients to be seen swiftly and
in time to deal with their problems. The project would also ensure that Twinpier could
continue to provide a flexible out-of-hours telephone advice service to those who were not
able to attend a BAC face-to-face appointment or who preferred to use the telephone.
For both BAC and Twinpier, the project was designed to allow them the opportunity of
offering their clients more than an immediate resolution of a crisis situation. Both agencies
offer clients traditional debt advice and, like many advice agencies, interventions often occur
at times of stress and severe financial difficulty. For both BAC and Twinpier, the partnership
project opened up, or strengthened, the possibility of offering clients a way forward that
would lead to greater financial stability in the future. By joining the credit union, clients would
be able to open transaction, savings or loan accounts and work towards preventing similar
crisis debt situations happening again.
For the original founders, therefore, the project was a partnership initiative that enabled each
organisation to add value to the service it offered to its members or clients. For SCU, the
project enabled a more effective system of advice agency referrals. For the advice agencies, it
opened the way to offering access to credit union products and services as part of the money
advice and debt counselling process. For Twinpier, this involved building on past experience,
as suggesting credit union membership was already part of its counselling process. But for
BAC, offering access to credit union products and services would introduce a completely new
element into the debt counselling process. For many advisers, trained in a strong ethos of
advice agency independence, this would be very challenging.
SCU-MAP tackled overindebtedness within the wider context of financial inclusion. It aimed
to serve those already overindebted and financially excluded and those in danger of
becoming excluded through increasing overindebtedness. Its methodology was holistic and
connected to outreach work delivered via a range of community-based initiatives and high
street-based organisations and initiatives such as Sure Start and Jobcentre Plus.
14
jmu_64p
21/4/08
16:48
Page 15
The aim was to deliver a joined-up service that would offer financial services and debt advice
in combination, in response to the needs of local communities. Even though not explicitly
stated, financial capability education underpinned the approach of the project and was to
inform the way credit union staff and debt advisers interacted with members and clients.
As project literature stressed, the aim of the project was to change a person's attitude towards
money management and personal finance. The money advice project was, therefore, an
intervention for change.
In summary, according to its business plan, as drawn up by SCU, the project had three stated
key objectives:
1. To provide existing credit union members with access to money advice services.
In reality, SCU-MAP was
a small-scale pilot
2. To provide potential credit union members with a full financial support service that
encompasses debt consolidation, money management, budgeting advice, access to
affordable credit and a savings facility.
3. To provide people who have requested help from professional money advice services
with access to a range of affordable financial services from Southwark Credit Union.
initiative to test out
partnership working over
a twelve-month period.
To achieve these objectives, the project employed a part-time debt support worker,
accountable to SCU, to develop the partnership and to provide an outreach service at BAC
and other community locations as required.
In reality, SCU-MAP was a small-scale pilot initiative to test out partnership working over a
twelve-month period. Its total external funding was only £15k. Given this exploratory status,
project objectives were relatively limited. BAC was engaged to reserve the equivalent of a
one-hour appointment per week for SCU referrals and Twinpier to accept at least one referral
per week from SCU. The specific targets that were set in the business plan were:1. 300 new adult credit union member accounts opened.
2. 40 credit union outreach sessions held at Blackfriars Advice Centre.
3. 60 credit union members referred for money advice or debt counselling.
4. 40 credit union members helped to resolve their immediate financial difficulties by
Twinpier.
5. 50 appointments reserved by Blackfriars Advice Centre exclusively for credit union
members (equivalent to one appointment per week over a 50-week ‘year’).
15
jmu_64p
21/4/08
16:48
Page 16
3
The Partners
The three partners within SCU-MAP were SCU (the lead partner), BAC and Twinpier. The
research project that ran alongside the money advice project was led by BAC with the active
participation of both SCU and Twinpier.
Blackfriars Advice Centre
In the year immediately
prior to the SCU-MAP
project’s inception
(October 2004 –
October 2005),
BAC dealt with 6,955
debt-related issues.
Since the mid-1990’s, BAC has served the people of Southwark and of the surrounding
boroughs from its offices on Walworth Road. It has fifteen advisers who are split into
teams for housing, debt, welfare benefits, Capitalise (face-to-face debt) and generalist work.
The teams also provide advice through the many outreach services offered by the Centre
which include Sure Start, GP surgery advice sessions and work with the local Irish and Bengali
Communities. BAC sees over 400 clients for advice each month.
Debt advice and income maximisation work have always been central to the work of BAC.
Most advisers deal with debt issues as the need arises, but, in addition, the agency has
a dedicated debt advice team of six LSC advisers who specialise in debt issues. BAC has a
contract with the Legal Services Commission to provide specialist advice in the areas of debt,
welfare benefits and housing. It is also one of the lead partners in the London-wide Capitalise
face-to-face debt advice project, funded by the Government’s Financial Inclusion Fund
through the Department for Business, Enterprise and Regulatory Reform (BERR).
In the year immediately prior to the SCU-MAP project’s inception (October 2004 – October
2005), BAC dealt with 6,955 debt-related issues.
BAC’s debt advice service is open to all who visit the agency, irrespective of financial status or
background. However, in line with advice agency experience elsewhere, BAC tends to focus its
services on low-income and financially excluded groups. There is a broad tendency for less
socially and financially excluded clients to favour the use of either commercial (‘fee-charging’)
debt management companies or free-to-client telephone services such as Payplan, the
Consumer Credit Counselling Service (CCCS), or National Debtline.4
This tendency is reinforced by the criteria attached to the major public funding streams
that support advice agencies to prioritise financial inclusion activity. The Capitalise Project,
for example, as a regional (London-wide) exemplar of a BERR/FIF supported project, is
specifically designed by Government as a financial inclusion initiative to provide debt and
money advice to financially excluded people experiencing debt and other financial problems
(HMT 2004a). More stringently, Legal Aid is only available to those who meet certain
financial eligibility criteria, which are intended to screen out those who are deemed to be able
to pay for advice.
Given this context, the BAC director, when contacted by SCU about a possible money advice
project, saw it as an opportunity both to reach out to a new group of clients, referred by the
credit union, and also to add value to the BAC’s own service provision within low-income
communities.
Financial inclusion was high on the BAC agenda, and the project offered the opportunity of
having access to the services of a credit union debt support worker, based in the BAC main
4 There are various reasons for this. Clients with a higher than means-tested benefit level income are more likely to have
disposable income and therefore be ‘suitable for’ the Debt Management Plans (DMPs) offered by CCCS and Payplan. Also, users
of telephone services in general tend to have reasonably high levels of articulacy and self-confidence, and are less likely to be
subject to ‘vulnerabilising’ factors such as low levels of English language skills, substantial mental health problems etc.
16
jmu_64p
21/4/08
16:48
Page 17
office and at outreach sessions, who would be able to introduce clients to the benefits of
credit union membership. Instead of just being an ‘accident and emergency’ service, BAC
would have a means of offering long-term support to clients, many of whom were without
access to savings, current accounts or affordable credit.
BAC recognised, however, that entering a partnership relationship with a credit union would
not be easy. It was likely to raise many complex questions for the agency, for experienced debt
advisers, and possibly for the credit union itself. These questions were regarded, even at the
outset, as likely to include such issues as the independence of the advice process, the
appropriateness of referrals to a potential creditor, the capacity of a credit union to support
people already heavily overindebted (advisers regularly assist people with £30 - £40k of
debt), the ethics of introducing a fast-track referral system for credit union referees, the
effectiveness of referrals to the agency from a credit union (given the lack of formal training
of those doing the referring) and possible credit union expectations about how bad debt to
the credit union itself would be dealt with by advisers in the future.
In 2007, SCU members
had collectively saved
£3.8 million.
However, even though BAC acknowledged that the partnership might be open to a range of
potential difficulties, misunderstandings and conflicts of interest, the perceived value of
brokering access to BAC services for credit union members and of enabling BAC clients to
access credit union financial services outweighed any possible hesitations.
Southwark Credit Union Ltd.
Southwark Credit Union (SCU), established in 1982, had by 2007 developed from a small
employee credit union into an important community financial institution serving over 6,000
members, all of whom lived or worked in Southwark (Decker and Jones 2007). In that year, its
members had collectively saved £3.8 million, £3.6 million of which was out on loan to other
members in the community. On average, at the start of the project, SCU was granting 250 new
loans, worth £250,000 to £300,000 in total each month.
Over the years, a series of amalgamations with small local credit unions and the development
of a network of community outreach services had moved SCU increasingly in the direction of
serving the low-income market, including people excluded, for whatever reason, from
mainstream financial services. This move was strengthened by the implementation of a range
of partnership projects with housing associations, community groups, Sure Start, Jobcentre
Plus and others. In recent years, SCU’s focus on financial inclusion has been strengthened by
its participation in the delivery of the Government’s Financial Inclusion Fund Growth Fund.
In general, an increased awareness of the link between poverty and financial exclusion has
led many credit unions, including SCU, to rethink their operations in low-income communities.
Traditionally, many credit unions argued that it was access to cheaper credit that enabled
financially excluded people to free themselves from high-cost interest payments on debts to
sub-prime credit providers, reduced overindebtedness by reducing the proportion of
household income spent on servicing debt, and improved overall household status and
stability (Jones 2006).
However, the limitations of tackling poverty through access to credit alone was highlighted in
a number of research reports, including a Barclays-commissioned report into credit unions and
loan guarantee schemes (Jones 2003). This research focused on five credit unions, all based
in low-income areas and with established lending programmes, funded through external
grants and donations, which aimed to make debt-redemption loans to people with debts to
high-cost lenders, primarily home credit providers, weekly-payment retail stores, and
sub-prime credit cards. The model used by these credit unions was based on the notion that,
once freed from high-cost interest rates, people would continue to pay the more affordable
credit union loans more easily.
17
jmu_64p
21/4/08
16:48
Page 18
In fact, the research findings revealed that such an approach was less than successful. Overall,
loan default rates were high and few borrowers moved into financial inclusion and stability.
The study concluded that if credit unions were to serve financially excluded people effectively,
they had to adopt more holistic and strategic approaches, which were based on access not
only to credit, but also to debt and money advice, budgeting accounts, and ongoing support.
It has now come to be accepted more widely that tackling poverty is dependent on greater
access to financial services (Demirgüç-Kunt 2008) based on a pathway to financial inclusion
that includes, in addition to credit, access to transaction accounts, savings accounts, insurance
products and the provision of money and debt advice (HM Treasury 1999b, 2004a, 2007).
Moreover, the role of financial capability education is now regarded as essential to
strengthening people’s capacity to make financial decisions.
Tackling poverty is
dependent on greater
access to financial
services.
The change in focus from tackling income poverty through lending to facilitating pathways to
financial inclusion in a more holistic sense has led to the emergence of a growing number of
professionally-organised community credit unions that are able to offer a range of financial
services and products geared to the low-income market (Jones 2006). SCU has been a lead
player in this group of credit unions and, through its involvement in the PEARLS project
(ABCUL 2004), was one of the first credit unions to modernise its lending policies and
introduce the new credit union current account. Given the important role of saving in
assisting people to move out of poverty (Sherraden 1991), SCU has also introduced a range of
savings products including Christmas and holiday savings accounts, aimed at low-income
members.
However, as the Barclays research stressed (Jones 2003), money and debt advice are central
to any holistic approach to tacking financial exclusion. This finding has been supported by
Citizens Advice, which has urged credit unions to “work constructively with money advice
agencies who are helping people deal with multiple debt problems” (CA 2001). In recent years,
credit unions have increasingly pioneered initiatives to build links with advice agencies and
to integrate access to money and debt advice within their service delivery. Examples include
the Money Advice and Budgeting Service at Enterprise Credit Union on Merseyside (Brown et
al., 2003) and the Citizens Advice Bureau and credit union partnership in South Tyneside
(Jones and Rahilly 2006). It was in order, therefore, to develop this strategic approach to
tackling financial exclusion that SCU approached BAC to create the money advice project.
Twinpier debt management agency
Twinpier is a debt management agency that has worked with credits unions, including SCU,
for a number of years. It offers debt advice and debt management interventions over the
telephone, at no cost to the credit union member or any other caller. Twinpier is funded
through grants, donations and commercial activity. This cross subsidy allows Twinpier to help
individual (i.e. non-business) callers for free.
Twinpier began as a service for sole traders and retail businesses that were experiencing debt
or cash flow problems. Subsequently, its services evolved to include helping the staff of these
businesses through employee assistance schemes. Through direct contact with staff, Twinpier
identified a gap in the market for free, independent and personalised debt advice for people
who were reluctant or unable to use either large national organisations such as National
Debtline and CCCS or local face-to-face providers such as CABx or other independent advice
centres. Twinpier has now developed a series of referral arrangements with housing
associations and credit unions through which it is able to offer access to its debt management
services.
It was important for SCU to include Twinpier in the money advice project since, not only did
Twinpier have a pre-existing relationship with the credit union, but it also offered an
18
jmu_64p
21/4/08
16:48
Page 19
alternative form of debt advice to the face-to-face option offered by BAC. Twinpier offers a
rapid response to telephone enquiries, with 95% of callers being contacted within one
working day. Twinpier maintains that it is this immediacy of access, together with the
anonymity of the telephone medium that often appeals to people in debt.
Twinpier offered an
alternative form of
debt advice to the
face-to-face option
offered by BAC.
Twinpier is not just an advice line. The agency offers a comprehensive debt management
service and will deal with all aspects relating to the resolution of debt problems by acting as
a third party recognised by creditors. It offers debt advice, arranges debt management plans
and brokers contact with creditors. Twinpier will also give advice on alternatives to debt
management such as individual voluntary arrangements (IVAs) and bankruptcy. Overall, its
aim is to reduce bureaucracy and delays in the accessing of debt advice, which is achieved
without the need for booking appointments or waiting.
In addition to offering a debt management service to individuals, Twinpier offers, in line with
its original role in advising businesses, a risk limitation service to credit unions. For a service
fee, it will deal with the administration and reporting involved in all aspects of IVA and
bankruptcy proposals sent to credit unions by debtors going through insolvency, as well as
offering more general advice on debt collection and delinquent accounts.
19
jmu_64p
21/4/08
16:48
Page 20
4
The Blackfriars Advice Centre
Financial Inclusion Research Project
Alongside and subsequent to SCU-MAP, a programme of research was undertaken to evaluate
its impact. This was conducted by the Research Unit for Financial Inclusion (RUFI) at Liverpool
John Moores University, supported and funded by the Friends Provident Foundation. This
report is based on the findings of that research programme.
A key aim of the
research was to inform
the development of
similar projects in the
future.
The aim of the research was twofold. Its primary aim was to evaluate the impact of SCU-MAP
on end-user beneficiaries and investigate how, and in what way, the project supported the
transition into longer-term financial stability or inclusion. A secondary aim was to generate
knowledge and understanding of the dynamics of partnership working so that SCU-MAP
would be able to inform the development of similar projects elsewhere in the future. Given the
small scale of the project, and the limited number of end-user beneficiaries who would be
served, the research into the dynamics of credit union and advice agency partnership working
took on a greater significance. For if the project could inform the development of partnership
working nationwide, a significant gain in the understanding of effective approaches to
financial inclusion would be achieved.
The research methodology relating to end-user beneficiaries included a statistical analysis of
client data kept by BAC, SCU and Twinpier, interviews and research discussions with money
advisers and credit union staff, and a series of interviews with end-user beneficiaries.
The findings of this direct impact research are mainly recorded in Chapter 6 of this report.
The wider research into the dynamics of the credit union/advice agency partnership explored
the experience of participant agencies in delivering the project to members and clients.
This was a collaborative research exercise in which participants were encouraged to reflect
upon and analyse their experience in order to identify the issues that they considered either
assisted or hindered project delivery.
This research was carried out with staff members, both operational and management, and
included a series of in-depth interviews and research discussions and evaluations. Staff
members were interviewed on several occasions in order to explore their experience and
thinking in greater depth and to monitor how perceptions and views developed both during
and after the project. Written contributions were also sought from staff members.
A key element of the research was the seminar held at the Friends Provident Foundation’s
main offices in London in December 2006. This event brought together major players and
stakeholders in the credit union and money advice sectors. The seminar was based on the
initial findings of the research and, through a process of collective discussion and debate,
key ideas and reflections were generated in order to inform the research findings and written
report. The overriding aim of the project was to identify general principles and elements of
good practice that would inform partnership working between credit unions and advice
agencies more generally.
Further consultation on the dynamics of partnership working was carried out throughout the
money advice and credit union sectors in order to verify and strengthen the research findings
emerging from the project. This stage of the project owes much to the ABCUL/Citizens
Advice CONNECT project, which was developed after the end of the SCU-MAP project, and
was concerned to promote partnership working between Citizens Advice Bureaux and credit
unions throughout Britain. In common with the SCU-MAP project, the CONNECT project was
developed with the financial support of Barclays.
20
jmu_64p
21/4/08
16:48
Page 21
5
The achievements of the Money Advice Project
The scope and impact of the SCU-MAP project were both limited and constrained. The project
was limited insofar as it operated for a period of only ten months, from January to November
2006, and had few organisational resources to call upon. It was constrained by a range of
organisational difficulties and set-backs, as already noted in the introduction. Nevertheless,
the money advice project achieved a number of notable successes:• 35 credit union outreach sessions were held at BAC.
• 25 people were referred directly from the credit union to BAC for debt advice.
• 51 people were referred to the Twinpier debt counselling service.
• Through the outreach sessions at BAC and other locations, 80 new members were
enrolled into the credit union.
The achievements of
the project went
beyond the immediate
impact of advice or
credit union services.
Other than the number of referrals to Twinpier (target = 40), the above figures were lower
than the original project targets of 40 outreach sessions at BAC, 60 referrals to BAC for
money advice or debt counselling (includes 50 reserved appointments at BAC based on a
target of one referral per week), and 300 new members joining the credit union. Yet, given the
organisational context, these lower figures are understandable and were to have been
expected.
For those directly benefiting from the project, either through referral for money or debt advice
or through credit union membership, the achievements of the project were real and tangible.
However, the achievements of the project went beyond the immediate impact of advice,
support or credit union services on the lives of individual beneficiaries. For the project
stimulated a process of reflection and thinking, both within the participating organisations
and beyond, with regard to the dynamics and interactions of money advice agencies and
credit unions working collectively to promote financial inclusion and stability. In many ways,
it was the wider learning that was achieved through the project which will have the greatest
and most durable impact within the field of money advice and credit union service delivery.
The beneficiaries
End-user beneficiaries, that is to say advice clients and credit union members, were located at
the centre of the SCU-MAP project. Its original aim was to provide existing and potential
credit union members with a full financial support service that encompassed debt
consolidation, money management, budgeting advice, access to affordable credit and savings
accounts. Equally, the project aimed to provide those requesting help from money advice
providers with access to the financial services of SCU. The fourteen beneficiaries interviewed
as part of the research confirmed, to a greater or lesser degree, that the project had offered
them a financial and advice service appropriate to their needs. Yet their comments, together
with observations on organisational practice, did raise issues and concerns that informed
learning arising from the project.
Credit union referrals to Blackfriars Advice Centre
Before the project, SCU already had in place a system of referring overindebted loan
applicants to debt counselling services. Loan officers would undertake income and
expenditure analysis with applicants, including a search of credit reference agencies, and, in
cases where a new loan was inappropriate, would refer applicants either to Twinpier or to
CCCS, both of which provide a telephone helpline. SCU-MAP was designed both to increase
the use of Twinpier and also, through the employment of a debt support worker, to offer both
loan applicants and others a fast-track money advice and debt counselling option at BAC.
21
jmu_64p
21/4/08
16:48
Page 22
In general, although not in every case, referrals to BAC related to cases of substantial and
more complex over-indebtedness.
25 people were referred to BAC for an aggregated total of debt of over a quarter of a million
pounds. 44% of individual debts were for amounts over £10,000, regarding which the credit
union alone would have been able to offer little support in the way of consolidating debt.
64% of those referred were women, of whom 62.5% were Black African or Black British. The
average age of women was 37 years, the majority of whom were lone parents. The average
age of men was 42.4 years. Nine people were new to the credit union and sought support
when they were already in financial difficulty. 64% were already credit union members.
64% of those referred
to BAC were women,
of whom 62.5% were
Black African or
Black British.
The types of debt regarding which advice was provided via referral were varied, but most were
non-priority debts such as defaults on bank loans, home credit loans and credit cards. There
were a few incidences of debts to utility companies.
People referred to BAC by the credit union
Age
Ethnicity
Status
Income
Debt issue
Savings
with SCU
Debt supported
(£s)
1
F
31
Black African
Single
Wages
Credit card defaults/loans
NM*
44,002.00
2
F
42
White Other
Single
Wages
Loans/defaults
NM*
40,000.00
3
M 33
White Other
Single
Wages
Loans/defaults
£233.00
35,000.00
4
M 44
White British
Single
Benefit
Credit card defaults
NM*
23,560.00
5
M 42
White European
Single
Wages
Loan/credit card defaults
NM*
18,400.00
6
F
44
White British
Single
Wages
Loans
£168.22
15,757.00
7
F
33
Black British
Single
Wages
Loan/credit card defaults
£95.41
14,169.41
8
M 34
White British
Single
Benefit
Rent arrears /council tax bill
£61.00
13,050.00
9
M 41
White Other
Single
Wages
Loans/defaults
NM*
12,000.00
10
F
37
Black British
Married
Wages
Loan/overdraft
£197.00
11,311.00
11
F
53
Black African
Single
Wages
Credit cards/overdraft
NM*
10,500.00
12
F
30
Black African
Single
Wages
Defaults on credit cards
£177.57
7,100.00
13 M 60
White British
Married
Wages
Loans/credit card bill
£1,778.85
6,545.00
14
F
44
Black African
Single
Wages
Overdrafts/loans
£833.79
5,500.00
15
F
35
Black African
Single
Benefit
Credit card defaults
NM*
5,487.97
16
F
21
Black British
Single
Benefits
Rent arrears/defaults on card
£266.87
5,201.15
17
F
51
Black British
Married
Wages
Loans/bills
£28.00
5,000.00
18
F
41
Black British
Single
Wages
Rent arrears
£526.20
4,116.00
19
F
38
White Other
Single
Wages
Overdraft/loan/credit card
£724.76
4,000.00
Asian
Married
Benefit
Overdrafts
NM*
3,613.01
NM*
3,415.00
20 M 49
21
F
28
White Irish
Single
Benefit
Credit card defaults
22
F
41
White British
Single
Wages
Bills
£453.48
1,500
23
F
22
White British
Single
Wages
Bills
£19.00
1,300.00
24 M 40
White British
Single
Wages
Defaults/overdrafts
£165.00
613.00
25 M 39
Black African
Single
Benefit
Loan
£33.00
600.00
£5,761.15
£278,690.54
* = New Member
22
jmu_64p
21/4/08
16:48
Page 23
An assessment of the impact of the debt advice offered to beneficiaries through BAC was
limited by three key factors:• The length of the project, the organisational set-backs at BAC, and the small number
of beneficiaries of advice did not allow for a full longitudinal study of the impact of
debt advice.
• Linked to the first point, information on the outcomes of appointments was not
systematically kept at BAC and thus follow-up data on the future experiences of
individual clients was not consistently available.
• This lack of data meant that once people had been referred to BAC, SCU received no
further information or data about their progress.
Both credit union and
advice centre staff felt
that much more could
have been achieved if
The lack of statistical data on individual beneficiary progression, and the consequent inability
to share such data, also impacted on the dynamics of the BAC-SCU partnership. On reflection,
both credit union and advice centre staff felt that much more could have been achieved if the
processes of referral, and of feedback on those referrals, had been more systematic and
rigorous. Even though the credit union was able to offer an enhanced service to people in
financial difficulty, there was evidence from some beneficiary interviews that the lack of a
joined-up system of referral and feedback did lead to a diminishing of the quality of the
member experience.
referrals had been
more systematic.
Case study 1
A credit union member, Ms H, a woman in her 40s, approached the credit union with
debts to various loan companies of more than £15k. The credit union referred Ms H to
BAC, where she attended a pre-arranged appointment. Unfortunately, even though
she met with a debt adviser, Ms H was not confident that BAC would sort out her
problem quickly and efficiently. Following her first meeting, she found it difficult to
contact advice staff and felt unable to return to the credit union.
Without further reference to the credit union, Ms H approached Gregory Pennington a
commercial debt management company with whom she took out a debt management
programme. Her immediate problem was solved; her monthly and debt repayments
were reduced by the company even though she would be repaying loans for a much
longer period as fees added considerable costs to her overall debt. “I needed an
immediate service, I needed the debt to be dealt with”, explained Ms H, “Gregory
Pennington, did everything efficiently on the phone and with a commercial company,
you can be sure things will be dealt with. I am now on a 10-year plan even though
I could leave at any time”.
Ms H was disappointed that the credit union link with the advice centre did not work
out for her. “I was left just not knowing how my debt issue would be dealt with, I felt the
credit union needs to be more reassuring and the staff at the advice centre need to come
over as more confident, professional and affirmative”. Despite this set-back, Ms H
continues to save and borrow from the credit union, which provides one of the few
lines of credit left open to her. For her, the credit union has become a key contributor
to her long-term financial stability.
23
jmu_64p
21/4/08
16:48
Page 24
Case study 2
Ms N, a woman in her 30s and a credit union member of twelve years’ standing, was
more than satisfied with the support she received. Ms N approached the credit union
debt support worker with a credit card debt problem amounting to over £14k. She was
referred for an interview at the advice centre where the adviser worked with her on a
personal financial statement. Together they examined, and analysed options and
eventually came up with a strategy that enabled Ms. N to take control of her own
affairs. Debts were consolidated and moved to providers offering lower rates of
interest over more affordable timescales. Ms N continues to save and borrow in the
credit union, and claims that the support offered by BAC, together with the access to
credit union services, has afforded her the financial stability she longed for. Just prior
to the research interview, she started a second job to clear the outstanding credit card
debts more quickly.
Now I feel safe and
cuddled, I pay in my
child benefit into the
credit union and can
save and borrow
without thinking
someone is out to make
a profit out of me.
One concern was the number of people referred by the credit union who did not, in the end,
take up their opportunity of an appointment at BAC. Five of the research interviewees failed
to attend the advice centre. The first, Ms S, a woman in her early 30s, came to the credit union
with debts of £44k on credit cards and a bank loan. She had previously been to the CAB for
financial advice but was directed to the credit union. There she met with the debt support
worker and an appointment at BAC was arranged. At the time of the research interview,
Ms. S was keen to keep this appointment as she felt it might assist her to have the interest
frozen on her loans. For, at the time, the scale of her interest payments meant that she was
paying nothing off her capital debt.
However, a follow-up research call several months later confirmed that Ms S did not attend
BAC after all. “With working, getting to the advice centre during the day was just too difficult”,
she explained, “I have now taken on extra work and am starting to do better in paying off the
debts. I think I did not go to the centre as I had started to work things out for myself”.
Unfortunately, the fact that Ms S had not attended the interview at BAC was not reported to,
or picked up by, the credit union. If it had, maybe some further advice or support could have
been offered (e.g. a referral to Twinpier). However, Ms. S has remained a SCU saving member.
She stressed, though, that “I don’t want anything more to do with borrowing!”
The other four referees failed to attend BAC for various reasons. One of these, Ms M, a 40-year
old lone parent, had been directed to the credit union by Southwark Council’s housing
department in order to seek a loan to pay off a shortfall in rent payments. Ms M, already a
member of the credit union and fearing eviction, applied for a loan of £1,000 to pay off the
arrears. This loan was granted and it enabled Ms M to settle the debt and retain her flat.
For this and other outstanding debts, Ms M was referred by the debt support worker both to
Twinpier and to the advice centre. However, she took up neither option. Once the pressure
was reduced in relation to the possible eviction, Ms M explained that she did not feel the
same need for advice. She remains a member of the credit union, which she uses as her
primary financial services provider. Having had a long history of financial exclusion and
borrowing from high-cost alternative lenders, she was able to report, “Now I feel safe and
cuddled, I pay in my child benefit into the credit union and can save and borrow without
thinking someone is out to make a profit out of me. I just use the credit union now for loans,
there is no where else I could go. I trust the credit union; I can speak to somebody I know and
having savings makes me feel good”.
24
jmu_64p
21/4/08
16:48
Page 25
Case study 3
Mr. M is in his mid 40s. He was not a member of the credit union when he arrived with
over £20k of unsecured debts, mostly on credit cards and a bank overdraft. He had
seen a notice in the SCU branch window offering a service for people with financial
difficulties. He rang and spoke to the debt support worker and an appointment was
made for him to see her in two days’ time. He knew nothing about credit unions, but
found his reception welcoming and non-judgemental. “This was the first time that
I had ever spoken to anyone about my situation”, he explained, “and I was feeling
extremely bad and guilty”. He met the debt support worker a second time without an
appointment. “The atmosphere was relaxed and calm”, he noted, “She said the simple
things which helped me feel ‘normal’ and that others were in the same situation as me.
She was very pleasant in her manner and gave clear advice”. An appointment was made
at BAC for three weeks later.
He knew nothing
about credit unions,
but found his
reception welcoming
and non-judgemental.
In comparison with the “dead friendly if a little amateurish” (in terms of the money
advice that they could offer) atmosphere of the credit union, Mr M described BAC as
professional and factual. “They seemed a little too hardened, as if they ‘had seen it all
before’, he reflected. “I sensed the team were under pressure, the interview was more
rushed but businesslike. The tone was very ‘matter of fact’. I supplied information as
requested but then I got more and more worried because I didn’t hear anything.
I wanted confirmation as to what I should do in response to the receipt of more default
notices and whether I should respond to some of the demands that were still coming
because of the debts. I tried to ring but could never get through and there was no
facility to leave messages. On Tuesday I took a day off and went to the BAC in person
but there was no-one there who could see me. I asked if someone would phone me but
no-one did. Today, (Tuesday, 2/5) I received my first contact; a phone call and an
e-mail. The BAC had been waiting for me get back to them once I had opened up
another bank account. The plan then was to ‘close’ my existing account and make an
offer of repayment for the other outstanding debts. However, this was not proving to be
easy. I applied to three loan companies but not heard from any of them.
He asked whether a holding letter had been sent out to the creditors and was advised
that ‘it probably has’. But after a second phone call, I now feel more reassured. Having
not been there before, I had no understanding of the timescale”.
Mr. M did receive the advice and support from BAC that he needed, even though his
experience of the service and the inter-connection between the advice centre and
credit union was not as seamless and efficient as it could have been. Yet through this
inter-connection, he was able to solve his pressing and significant debt issue, a result
that would not have happened in the same way without the BAC-SCU partnership.
Mr M went on to join the credit union and now uses it to save “The last thing I want is
another loan”, he added, “so I haven’t looked into that”.
The credit union practice of making loans to enable borrowers to pay off rent arrears was
noted as an issue of concern by debt advisers (see Section 6, Managing referrals, below).
Indeed, a speedier referrals to advice system may have resulted in an agreement with the
Council that did not depend on Ms M taking out a loan to pay off rent arrears and incurring
credit union interest on those arrears. Ms M claimed, however, that eviction was possible and
it was only the cash payment on the day that prevented it happening. She has no regrets
about taking that course of action and now recommends to friends that they seek a loan from
the credit union if they find themselves in the position of having to make an immediate cash
payment to settle rent arrears.
25
jmu_64p
21/4/08
16:48
Page 26
Incidentally, Ms M was not the only interviewee to receive a loan to repay rent arrears. Ms L,
a 49-year old woman on income support and disability living allowance, living with her
partner, reported that the Southwark Council rent officer had suggested that she contacted
the credit union to apply for a loan to pay her rent arrears of £500. She joined the credit union
and the loan was granted, in her words, “without any problem”.
Once the problem was solved, Ms M did not feel the need to seek any money or debt advice.
However, she has continued to save in the credit union. As for other loans, she reported that,
“I borrowed from the credit union for the rent because I had little other option. And I don’t feel
ripped off. But I don’t know much about the credit union and it is difficult to get through to,
nobody answers the phone and you don’t get much information in the office. I do need more
money but I’m going back to Provident Financial, they are much more convenient and easy to
get hold of”.
It is arguable that
many of the people
referred by SCU to BAC
who did not attend the
appointment were
seeking money
guidance rather than
debt advice.
Regarding the other people referred who failed to attend a BAC appointment, Mr M, a 40year-old member who had seen a notice about the partnership project in the Pilgrim Street
branch of the credit union, felt that his meeting with the credit union debt support worker had
been so brief that it did not give him the confidence to go to an advice centre. Another did
“just not get around to it”and the fifth reported he still intended to go at some time.
What these three people had in common, however, was the relatively low level of debt that
they held (when compared with most other referees). For two referees, their total debt was
around £600, and for the third the amount was £1,300. In one way or another, all three
managed to cope with their debts themselves. However, all acknowledged that they were able
to do this because of the support they received through the credit union.
Ms R, a young woman in her early 20s, heard about the credit union through the Jobcentre’s
Pathways to Work service, organised by the welfare-to-work provider, Work Directions, where
the credit union ran an outreach session. Ms R had received some commercial money advice
regarding her £1.3k utilities debts from Church Wood Financial. However, in order to achieve
financial stability, Ms R also required access to convenient and affordable financial services.
She opened a current and savings accounts and took out a £500 credit union loan that meant
she no longer had to seek high-cost credit. Ms R was referred to BAC by the debt support
worker for support with her utility bill debts. However, having joined the credit union, Ms R no
longer felt the same need to seek debt advice, as she felt more in control of her financial
affairs.
The same was true of Mr T, a man in his late 30s, who was in receipt of Jobseekers Allowance
and who first became aware of the credit union at a Reed in Partnership office. He made an
appointment with the debt support worker and joined the credit union. Having had real
difficulties with banks and now being in possession of a poor credit record, Mr T looked to the
credit union for access to a range of financial products and services. He had his Jobseekers
Allowance redirected from his bank to the credit union and was delighted to be able to access
a £400 loan from the credit union to go to his uncle’s funeral in Africa. Once in the credit
union, like Ms R, Mr T also felt more in control of his financial affairs and less in need of debt
advice.
It is arguably the case that people who did not attend the BAC appointment were not in fact
seeking advice about a pressing debt problem. Rather, they were seeking more generalist
money advice, and support with money management and budgeting, and once their financial
situation had stabilised in the credit union the need for such advice was perceived as reduced.
One member of ten years’ standing, Ms L, a 40-year old woman, did attend her BAC
appointment. She had gone with a £1.5k utilities debt, and was seeking advice on managing
her money. “The adviser was not too happy to see me,” she reported, “and said that the advice
centre was unable to help me as it did not offer money management advice, only crisis debt
advice”.
26
jmu_64p
21/4/08
16:48
Page 27
Credit union referrals to Twinpier
In contrast to BAC, the Twinpier Debt Management Agency already had an ongoing
relationship with the credit union, which pre-dated SCU-MAP. Credit union loan officers would
regularly refer people to Twinpier if it was judged, as part of the credit administration process,
that they would be unable to repay a loan because of existing outstanding debts or a poor
credit record. The project was designed to expand and develop this telephone referral facility
within the credit union. Unlike the referrals to BAC, which were all made by the project’s debt
support worker, referrals to Twinpier were also made directly by loan officers.
The project was
designed to expand and
develop telephone
referral and 51 people
were referred to Twinpier
in relation to debts
totalling £303k.
Decisions regarding whether to refer a given person to Twinpier (for telephone advice} or to
BAC (for face-to-face advice) seemed primarily to be based on criteria relating to the size and
complexity of a person’s overall debt ‘portfolio’. 51 people were referred to Twinpier in relation
to debts totalling £303k (£264k of non-priority debts and £39K of priority debts).
The average debt of a person referred to Twinpier was just under £6k. This compares with an
average debt of £13k of those referred to Blackfriars Advice Centre (this figure does not take
account of the four people with low loan balances; three of whom did not attend their
appointment and the fourth who did attend but was not assessed due to her need for generic
financial advice rather than debt advice).
Most referrals (over 75%) to Twinpier were assisted with (unsecured) non-priority debts
(credit cards, overdrafts and personal loans). Priority debts advised on included council tax
and rent arrears. Twinpier reported that there were some fuel debts but these did not surface
as a major issue among those referred.
About 40% of all callers to Twinpier were advised on bankruptcy because of their heavily
over-indebted situation, and all received a copy of the Insolvency Service’s Guide to Personal
Bankruptcy. Five of the people advised on bankruptcy made an application to the EDF Energy
Trust 5 to obtain a grant for the bankruptcy fee (£335).
As far as Twinpier is aware, however, no person referred by the credit union entered into an
Individual Voluntary Arrangement (IVA), nor did Twinpier recommend anyone to do so.
In most other cases where clients supplied details of their debts, a repayment plan was offered
as an alternative to bankruptcy. Thirteen people (approximately 44% of those offered a
repayment plan) maintained active credit union accounts and continued to make regular
payments according to the plan. Some of the people who did not action the repayment plan,
however, did call Twinpier from time to time for small pieces of advice (e.g. what to offer a
creditor or enquiries about bailiffs’ rights of entry etc.).
It is Twinpier’s view that a successful outcome to any debt management plan depends on the
ability people have both to save and to make regular repayments. As Twinpier’s manager
stressed, “This is most crucial if you are to avoid the need to get into future debt hence the
importance of linking up with Southwark and Lambeth credit unions”. Of the 51 people
referred to Twinpier, 23 (45%) continued to save and repay a loan with the credit union and
two (4%) were refused a loan but were still saving. This meant that 25 of the 51 people
referred to Twinpier made positive progress in financial stability and tackling overindebtedness. On the other hand, five were in default and not paying, two were not paying
due to bankruptcy, and twelve had inactive accounts. Eight people referred to Twinpier did
not join the credit union.
Of the thirteen people on a regular repayment plan, seven were paying off loans and saving
with the credit union, three had inactive accounts, and three were not members.
5 The EDF Energy Trust is a registered charity funded by EDF Energy. It awards grants to individuals, who are domestic customers
of EDF Energy to help with gas or electricity debts or other essential domestic bills and costs. It aims to help people take control
of their finances by reducing the burden of their debts.
27
jmu_64p
21/4/08
16:48
Page 28
There was some evidence from Twinpier that people used the telephone service because it
was fast, free and confidential. There were no appointments or waiting time, which was
important for people with work or childcare commitments. One useful and valued service
offered by Twinpier was phone callback. If people made a call to Twinpier from a mobile
phone, their call would be returned thus saving their phone credit and limiting the expense
they would have incurred to sort out their debt problem.
People joining the credit union through BAC and other organisations
38 people joined the credit union directly through its link with BAC and another 40+ through
links and connections generated by the project with other organisations throughout the
borough (e.g. Sure Start, Jobcentre Plus, CABx etc.).
38 people joined the
credit union directly
through its link with
BAC and another 40+
through links and
connections generated
by the project with other
organisations
throughout the borough.
However, there were no actual referrals from the advice centre to the credit union. Here,
‘referral’ means an adviser proposing, recommending or even hinting to a client as part of the
advice process that joining the credit union may be in his or her interest and/or may assist
with the resolution of a particular financial problem. This definition of ‘referral’ implies that
the adviser points somebody towards the financial institution and/or even clears his or her
path to membership by facilitating an introduction or appointment for the client at the
credit union.
Advice centre staff were very clear that, as an independent advice agency, BAC could not
recommend or suggest that a client join a particular financial institution, including a credit
union. As one adviser stressed, “I cannot be seen to recommend anyone to any creditor”. For
many advisers, it is a fundamental principle that those in debt should not borrow at all. Some
advisers went further and felt that they could not even recommend a client to save or to have
a current account in a credit union, if that same person intended to take out a credit union
loan now or in the future. For them, borrowing from the same financial institution in which a
person’s capital is invested may not be in that person’s longer-term interest if he or she faced
financial difficulties in the future and was unable to repay the loan.
Clearly, in a situation where the credit union could confidently refer its members to the advice
agency, but the advice agency felt compromised in directly referring its clients to the credit
union, the notion of a genuinely functional reciprocal relationship raised some keen and
vibrant issues. In fact, the issues relating to referrals made by advice agencies to financial
institutions are complex, contested and nationally recognised. They regularly surface in
money advice and credit union partnership working discussions and have been subject to
Government review and recommendation (HM Treasury 2004a).
A key achievement of the BAC-SCU partnership was to bring these issues to the surface and
to offer both an analysis of their origins and a way of coping with them (these are discussed
in depth in Chapter 6 – Research Findings). Indicative of contested views in this area, Twinpier
had no difficulty in recommending its clients to join the credit union. On the contrary, Twinpier
saw the encouragement of saving with the credit union to be a key strategic element in
combating financial exclusion and long-term overindebtedness.
Hesitation about recommending the credit union to particular individual clients as part of the
advice process did not mean that BAC failed to present the credit union to all its clients as an
important and viable option. As part of the project, the credit union was advertised widely in
the advice centre premises where the credit union debt support worker ran a weekly
outreach surgery.
In addition, BAC staff were encouraged to consider and include the credit union as a referral
option. In a sense, this gave a de facto endorsement of the credit union to advice clients as an
organisation appropriate to advice clients’ needs. It was through this promotion of the credit
union within the advice centre that 38 people joined and became new members of the credit
28
jmu_64p
21/4/08
16:48
Page 29
union. This represents an average of more than one new member a week during the period
that outreach surgeries were held in the advice centre.
Through the outreach surgery, the credit union was able to contact people that normally would
not have been reached by standard credit union services. Of the 38 new members, 24 (60%)
were women, 29 (76%) were Black African or Black British, 23 (60%) were Black African. The
average age of all new members was 40 and the median age 38 years. 50% of the group were
35 years or younger. This compares with the fact that, overall, the majority of new members in
SCU are white, accounting for 61.51% of all members recruited since June 2006, with only
28% of them being 35 years or younger (Decker and Jones 2007). The project was able to
reach out to a younger, more ethnically diverse potential membership group.
Through the outreach
surgery, the credit union
The demographic group most strongly represented were Black African women. They
constituted 34% of the total new membership and 57% of female new members.
Their average age was 38 years. The second-largest group were Black African men.
They represented 26% of the total new membership and 71% of the men recruited to the
credit union. The project highlighted the specific needs of migrant communities and how a
credit union could respond effectively, as evidenced in the case study below.
was able to contact
people who normally
would not have been
Case study 4
reached by standard
Mr C joined the credit union through BAC. He was 38, Black African, married with
children, and worked as a part-time cashier in a supermarket and as a car park
attendant. Mr C came to the UK in 1995 and, since his arrival here, had been in
constant need of credit facilities to support his family and children in Africa and,
eventually, to bring them to this country. His only source of credit since 1995 had been
the home credit company, Provident Financial, to which he was introduced by a family
friend. He has borrowed regularly from the home credit company over the years,
normally at a rate of about £1,000 at a time, but sometimes much more. He has found
Provident Financial to be a convenient and flexible source of credit that is always there
when needed. He acknowledged that he never thought about the level of the interest
payments, even though he knew them to be high. What was more important was
having access to credit. He even had the home credit collector’s mobile phone number
in case he needed a loan quickly.
credit union services.
However, Mr C was becoming progressively aware of the high cost of his home credit
loans. When his wife had a baby, and Mr C was in need of financial help, he went to
see one of the workers at Charterhouse-in-Southwark Settlement, where a regular
Sure Start session was organised. The worker directed him to BAC, where he met the
credit union debt support worker. There he joined the credit union and received the
£750 loan he required. He opened a savings account into which he makes regular
payments by direct debit. He admitted that he had not known anything about the
credit union before going to BAC, but now argues that, if he had known about it earlier,
he would not have kept going back for home credit loans.
29
jmu_64p
21/4/08
16:48
Page 30
The participating organisations
In 2005, when the SCU-MAP project was established, partnership projects between credit
unions and money advice agencies were neither as well-known nor as widespread as they are
today. However, for its founders, the potential of a joint initiative aimed at tackling
overindebtedness and financial exclusion was self-evident and worthy of testing in practice.
As well as creating added value for beneficiaries, the project influenced the thinking and
development of all three organisations involved.
In 2005, when the
For BAC, the project presented a challenge to its advisers to consider the role of an advice
agency in the context of promoting pathways to financial inclusion and stability for its clients.
The question was how, and in what way, could debt advice be linked to access to financial
services and to generic money advice and financial education. A key element of this challenge
was how BAC could relate to a financial institution and, at the same time, retain its
independence and overriding commitment to clients. For BAC, the project highlighted both
the importance and the complexities of the issues involved.
SCU-MAP project was
established, partnership
projects between credit
Case study 5
unions and money
Ms B, who joined SCU via BAC, is of pension age, living on her own and in receipt of
housing and council tax benefits. She went to BAC when she received an eviction
notice. Ms B had arrears of approximately £1.5k, accrued because she had been paying
her rent every four weeks instead of on a calendar month basis, which inevitably left
her rent account four weeks short for every year of her tenancy. The advice worker at
BAC telephoned the local authority and accompanied Ms B to court where possession
of her flat was suspended on payment of £5 per month from the arrears.
advice agencies were
neither as well-known
nor as widespread as
they are today.
After the court hearing, Ms B received further help via a debt management plan, for
her other outstanding debts. She pays the plan £60 per month, which is then
distributed to repay all debts including the rent arrears. Ms B met the debt support
worker at BAC, who was introduced to her by an advice worker. Ms B joined the credit
union and now has her pension paid directly into her credit union account. Previously,
Ms. B found that she was unable to save and, given her credit history, there was no
possibility of a loan except from high cost lenders. Since joining the credit union, she
has received a loan of £300 to pay off her debts to catalogue companies.
Ms. B reported that, “I feel much happier in myself now. Everything had been getting on
top of me - especially the rent. The BAC provided someone to lean on. I didn’t know what
to do and they did. They came with me to the court to sort it out”. At the time of the
interview, Ms. B collected her pension in cash from the credit union and then paid her
rent and all her other outgoings in cash out of her withdrawal. She was with the credit
union, but noted, “I was wondering if there is a facility for direct payments, so I do not
need to pay the rent in cash. Another snag with the credit union is that I always
withdraw my money on a Friday and the office doesn’t open until 11am on that day.
With the NatWest I had a card and could use the hole in the wall”. Since November
2006, SCU has introduced current accounts that are able to provide her with both a
debit card and facilities for direct debits.
The case of Ms B. highlights the fact that the benefits of credit union membership
extend beyond access to credit.
30
jmu_64p
21/4/08
16:48
Page 31
Even with a shared commitment to financial inclusion, credit unions and advice agencies are
different entities with distinct organisational and cultural perspectives on credit, debt, and
access to financial services. However, based on project experience, advisers were able to
clarify for themselves some of the complexities of joint working and develop a deeper
awareness of credit union principles and operating procedures. The result for advisers was a
clearer appreciation of how the two organisations could work effectively together.
Even with a shared
An important element in assisting the developing adviser awareness of credit unions was the
realisation that, as financial institutions, they offered more than just credit. Supporting
people to access savings accounts, for example, is an important step on the pathway to
financial inclusion, as current high-level proposals to include an agreed trigger figure for
savings within the standardised income and expenditure tool, the Common Financial
Statement (CFS) seem to suggest (HMT 2007b).6 BAC advisers were able to develop an
understanding of SCU as an organisation that could offer a range of financial services.
Since the project ended, this has led to BAC participating in the Southwark Financial Inclusion
Forum where, with SCU, it is exploring the possibility of joint work in the area of financial
capability work.
commitment to financial
inclusion, credit unions
and advice agencies are
Case study 6
different entities with
distinct organisational
and cultural
perspectives on credit,
debt, and access to
financial services.
Mr M joined SCU via BAC. He was prompted to join the credit union in order to obtain
access to an affordable current account. At the time of the interview, Mr M lived with
his wife and two children and received disability living allowance because of his
epilepsy and heart condition. He banked with Halifax and had done so for over
twenty years. He had no overdraft facility and had recently found out that his direct
debit deductions (for life insurance, house insurance etc.) were sometimes out of step
with the receipt of his benefit income. This left him overdrawn by small amounts for
short periods.
One month, Mr M found that his bank had charged him £280 in default penalty fees
for the cumulative effects of three overpayments caused by failed direct debits. This
left him extremely distressed and upset. He was particularly worried that he might lose
his television because he could not afford the next hire purchase repayment as he was
paying off his bank charges. BAC was able to advise him on how to contact the
television hire-purchase company and a new repayment plan was agreed. He has since
paid off his television debt. He was also advised to reduce the number of his direct
debits, which he did. At BAC, he approached the debt support worker with a view to
opening one of SCU’s new current accounts.
For SCU, having a closer association with an advice agency heightened awareness and
understanding of the centrality of money and debt advice in tackling financial exclusion.
It helped staff develop awareness of the policies, processes and procedures in relation to
money and debt advice that need to be in place to ensure a quality service for its members.
The project was a learning experience for SCU management and staff, which has led to the
credit union ensuring that credit administration procedures embed an opportunity for loan
applicants to be referred for money or debt advice if appropriate.
6 For more information on the CFS, please go to the Money Advice Trust website www.moneyadvicetrust.org.
31
jmu_64p
21/4/08
16:48
Page 32
However, there was evidence from credit union interviewees that the close link with
debt advice services had resulted in the credit union tightening its lending procedures.
The suggestion was that the link with advice services had resulted in the credit union
becoming more aware of the problem of overindebtedness and more risk averse. As a result,
people who may have been granted a loan in the past were now referred to a debt advice
agency. For SCU, this was part of a developing process of responding to overindebted loan
applicants appropriately.
The greatist number of SCU referrals by type was to Twinpier, which confirmed that access to
an independent telephone debt advice line was an important element in the development of
a holistic service aimed at tackling financial exclusion. It was clear to Twinpier that what
mattered to many callers to the service was access to a rapid and responsive service. It also
confirmed for Twinpier the importance of access to credit union financial services for those
endeavouring to achieve financial stability in their lives. Twinpier now works with a number
of credit unions in the London area.
The project established
the fundamental
importance of a joined-up
Overall, the project, albeit a relatively short-term intervention, promoted the model of joint
credit union-money advice agency working both locally and nationally. For the organisations
concerned, and for similar organisations nationwide, the project established the fundamental
importance of a joined-up approach to tackling financial exclusion and overindebtedness.
approach to tackling
financial exclusion and
overindebtedness.
32
jmu_64p
21/4/08
16:48
Page 33
6
Research findings
The SCU-MAP project contributed positively both to the lives of its beneficiaries and to the
organisational learning and work practices of the three partners. The project did not meet all
its objectives, but it did achieve sufficient success to prove its value both to beneficiaries and
to the participating organisations. All three partner agencies were keen on the notion of
further collaborative working in the future.
The project notably
succeeded in stimulating
a process of thinking and
reflection on the purpose,
The project notably succeeded in stimulating a process of thinking and reflection on the
purpose, nature and dynamics of partnership programmes involving credit unions and advice
agencies. The SCU-MAP project was not unproblematic and it was not without its
misunderstandings, disagreements and set-backs. However, it engendered a debate about the
realities of partnership working, which contributed to an emerging understanding of what
constitutes good practice in this area. The debate among both partners and the wider group
of stakeholders raised key questions and clarified issues in a way that facilitated the
identification of the key findings arising from the research.
The following paragraphs discuss the key areas that were explored in the project. Not all of
the questions, issues or challenges arose directly out of the operation of the SCU-MAP project
itself, some emerged from the process of reflection that the project encouraged.
nature and dynamics of
partnership programmes
involving credit unions
and advice agencies.
Establishing a vision and purpose
SCU-MAP was initiated according to a vision of credit unions and advice agencies working
together to collectively address the problems of overindebtedness and financial exclusion.
This vision was shared by the original founders of the partnership, who prior to the
partnership, had between them developed a common understanding of the need for the
project and had a high level of trust in the capability of each other’s organisation to deliver.
It was a vision with which Twinpier was happy to be associated.
The vision clarified for the original partners the purpose of the project, which was to test out
in practice the possibility of partnership working between two distinct but potentially
complementary types of agency. The founders knew what they wanted to do; the project was
to reveal how this could and should be done. The project aimed to turn a vision into effective
action.
Research elsewhere has confirmed that establishing a common vision and sense of purpose is
critical to the development of partnership working (Jones and Rahilly 2006). Moreover, of
equal importance is the need to communicate what may often start out as a high-level
(i.e. Board or senior management) vision throughout participating organisations. Typically,
this process is led by one or two key charismatic individuals who drive the partnership forward.
The problem for the SCU-MAP project was that two key initiators of the project, one from BAC
and the other from SCU, left their respective organisations before the project had the chance
to get off the ground. The person responsible for the initiation of the project at BAC left first
and, tragically, the BAC director, responsible for project delivery, took ill during the project
period and died shortly afterwards. The impact on the development of effective partnership
working is not difficult to imagine. The result was that the shared vision and sense of purpose
of the original founders failed to be communicated, understood, and owned throughout the
organisations.
Initial training/briefing events had taken place in order to introduce BAC and SCU staff to the
vision, purpose and operations of the partnership project. However, as this process of keeping
33
jmu_64p
21/4/08
16:48
Page 34
people informed and engaged did not continue throughout the project period and, critically,
did not involve all staff, communication processes were not sufficient to result in a mutual
understanding about the project becoming embedded within the organisations. Many of the
questions, issues and challenges of the project, raised mainly by BAC staff, but also by others,
were not explored in sufficient depth to be resolved to the satisfaction of staff members.
This strongly highlights the need for in-depth processes of mutual induction if partnership
working between advice agencies and credit unions is to succeed.
The need for induction arose not just because of a need for information, but because the
power of partnership is only released when those in the participating organisations have a
common understanding of its goals and direction. A shared sense of purpose inspires,
motivates and co-ordinates the kinds of actions that a partnership needs in order to bring
added value for clients and members.
The resolution of
misunderstandings
depends on the
seriousness of the
commitment to
constructive debate.
However, it was clear that even without the management setbacks, generating a common
vision and sense of purpose would be challenging. Advice workers and credit union staff are
to a degree the product of different organisational cultures and carry with them distinct sets
of underlying assumptions, beliefs, perspectives and interests.
For some BAC advisers, the independence of the advice agency was paramount and a close
working relationship with a credit union potentially undermined some of the basic principles
of the advice process. Advisers were, for example, reluctant to refer clients to a financial
institution that potentially might become their creditor (see section 6 on managing referrals).
Credit union staff also had their own assumptions and perspectives and, for them, failure to
refer a financially excluded or overindebted client to a credit union, or at least offer the option
of credit union membership, appeared tantamount to not acting in that client’s best interests.
More fundamentally, the task of establishing a common vision and purpose across both staff
teams was inevitably challenging, as there was an absence of a common language with which
to express basic concepts and understandings. For example, the terms ‘money’, ‘debt’ and
‘financial’ advice were used interchangeably and with varying meanings by different people.
The result was that beneficiaries were referred to the advice agency for money advice, which
was often understood as generic financial advice by the sender and debt advice by the adviser.
All the referred person discovered was that the money advice they required was unobtainable
as the advice agency only dealt in debt advice. There was also a lack of firm evidence to
suggest that advisers and credit union personnel even had a common understanding of the
term ‘financial inclusion’.
The SCU-MAP project brought into relief the ways in which a shared vision and purpose can
be compromised if issues and concerns relating to organisational identity, priority, activity
and ethos are not recognised, explored and resolved from the outset. Of course, resolution
does not necessarily mean full agreement on every issue but, rather, in some cases it may
mean a mutual recognition and acceptance, on the basis of trust, of the divergent
perspectives and interests of the partner organisations.
However, this resolution process depends ultimately on the leadership of those driving the
partnership, on the quality and availability of information about participating agencies, and
on the seriousness of the commitment to constructive debate and communication among and
within the partner organisations. As research has shown elsewhere (Jones and Rahilly 2006),
finding workable solutions also depends on the level of mutual trust and confidence that each
organisation has in each other’s principles, processes and organisational capacity.
Unfortunately, the resolution process was only partially completed on SCU-MAP.
The process of embedding a cross-organisational shared vision and sense of purpose takes
time, and depends on a strategic approach to effective communication among staff members
and consolidation of the value of the vision through measurable and observable win-win
situations. When the positive impact of advice on the life of the client, for example, is
34
jmu_64p
21/4/08
16:48
Page 35
communicated to the credit union staff member who referred the person to the advice agency,
then partnership working is strengthened.
The same applies in reverse, i.e. when a debt adviser hears of a client moving into financial
stability through credit union membership. Consolidating the partnership depends on
feedback, which ultimately contributes to the development of mutual trust and confidence.
With some exceptions, reciprocal feedback was generally lacking in SCU-MAP. Once having
made a referral to BAC, for example, the credit union rarely heard about its outcome, often to
the extent of not even knowing whether the client had attended their first appointment.
Conversely, BAC staff were not aware, for the most part, of any new credit union members
recruited through the outreach session in the advice centre.
The key issue for any
partnership is that of
referrals. Success depends
ultimately on good
referral practice and
procedures.
On reflection, at the end of the project, both credit union and BAC staff recognised that, even
though the project had achieved many of its objectives, its full potential had not been
realised. This was particularly well recognised by BAC advisers. Advice work is beginning to
move, more and more, from an overriding focus on crisis debt management to more
preventative measures aimed at enabling the future financial stability of financially excluded
clients.
The SCU-MAP project offered BAC the opportunity to develop a holistic approach to financial
inclusion and build an understanding of the role and position of debt advice in meeting wider
financial inclusion agendas. It was acknowledged that if the project had not suffered the
set-backs it did, with good leadership, it would have had the potential of achieving
much more.
Managing referrals
The key issue for any partnership is that of referrals. Success depends ultimately on good
referral practice and procedures. As the word ‘partnership’ suggests, referrals are intended to
be mutual - both from the credit union to the advice agency and vice versa. However, the
assumption that such a two-way model will be simple to implement should be challenged, as
in reality such arrangements are not necessarily as straightforward as one might expect them
to be.
SCU-MAP revealed clearly the complexity of the issues associated with referral in both
directions and the challenge of developing an effective referral process. Mutual referrals have
the potential of adding value to the service delivery of each partner organisation. Yet, if
policies and procedures are undecided, unclear or poor, referrals have the potential of having
just the opposite effect.
Referrals made by the credit union to advice agencies.
From the credit union perspective, the project arose originally out the need of SCU to offer a
specialist debt and money advice referral service to the increasing number of overindebted
people who were approaching the credit union for help or for loans. Unable to provide further
credit, the credit union required a better solution than just declining loan applications.
It needed to offer appropriate support to members and others, many of whom came to the
credit union in a state of distress.
Referrals from the credit union to both BAC and Twinpier were central to the project. Those to
BAC were made mostly by the debt support worker, to whom credit union loan officers would
refer overindebted loan applicants. Referrals to Twinpier were made mostly by loan
officers themselves. The decision to be referred to Twinpier for telephone advice or to BAC for
face-to-face advice turned mainly on the size and complexity of the debt. In general, larger
and more complex debts were referred to the debt support worker for onward referral to BAC.
It was stressed at the credit union, however, that referrals to either organisation were made
35
jmu_64p
21/4/08
16:48
Page 36
only for those debts regarding which the credit union could not itself give some
straightforward advice.
Many of the referrals to BAC and Twinpier were problem free and interviewees spoke of the
positive outcomes of the referral and of the advice given at BAC. However, a number of issues
did emerge from research interviews that have a bearing on the development of good referral
practice. Interviews with advice agency staff raised issues about the appropriateness of some
referrals and about the information given to people about the advice process in the credit
union prior to an appointment being made. Interviews with those referred also revealed
issues about the process of referral itself.
All individuals referred by SCU to BAC were referred to specialist debt advisers. There was
evidence that some of those referred did not have the kind of problems that BAC advisers
expected to deal with. In fact, on one or two occasions referred people were turned away by
BAC advisers on the grounds that the referral had been inappropriate.
Generic money advice,
money management
support and budgeting
advice represented a clear
unmet need.
This situation tended to arise when the person referred was seeking advice about a range of
financial issues rather than debt advice, but had nevertheless been referred by the credit union.
This highlighted the need for an effective referral system to include some form of filter, triage
or sorting procedure so that appropriate referrals can be made to the correct advisers. BAC
picked up on this issue on several occasions. As one adviser noted, “Some of the referrals which
were made to Blackfriars were not really money advice appointments (often more budgeting
and/or financial advice) and I think we should have done a short "Money Advice Awareness"
session with them (credit union staff) so they had a better understanding of what we do and
how we work”. Here it is clear that the adviser is using the term money advice to mean debt
advice. But confusions about terminology clearly also led to confusions about practice.
However, despite terminological opacity, the adviser’s point remains.
In some partnership projects, credit union staff undertake money and debt advice training,
not so as to replicate advice agency services but to ensure that workers understand the nature
of debt, in all its forms, recognise the triggers that point to its existence, and understand the
importance of only referring appropriate cases to advice agencies (Jones and Rahilly 2006).
In general, lack of experience, knowledge and training can result in inappropriate referrals
that not only waste adviser time but also result in disappointment for the referred person.
It is also important to note that lack of experience, knowledge and training can also result not
only in inappropriate referrals but also in a failure to refer people who would have benefited
from money or debt advice. Credit union staff need to be able to spot and identify the triggers
that suggest a member could benefit from money or debt advice. There were examples from
SCU-MAP of loans being made by the credit union to cover the lump-sum repayment of rent
arrears, for example, which could have been addressed differently with the support of a
money adviser. One issue that did not surface in the project but was noted by those consulted
elsewhere was that of credit unions failing to refer someone to an adviser whose debt was to
the credit union itself. This is certainly a possible issue, but one that should be dealt with in
the context of acting in the best interests of the member, rather than with a primary thought
to protect the credit union’s loan book.
The level of ‘inappropriate’ referrals did, however, highlight the need of many people coming
to the credit union for assistance with generic money advice. Even though the project was
entitled a “money advice project”, in fact, in reality, it was a specialist debt advice project for
those in particular crisis situations. Nowhere within the project, either at BAC, SCU or
Twinpier, was there any provision for more generic money advice, for money management
support or for budgeting advice. This was a clear unmet need. Some of the interviewees,
previously in debt, had consciously approached the credit union and the project for money
(generic financial) advice to assist with their future financial stability. Even though it was a
36
jmu_64p
21/4/08
16:48
Page 37
goal of the project, money advice or financial capability education, as distinct from debt
advice, did not feature as part of the support to people on their pathway to stability and
inclusion. This was experienced both by advisers and those referred as a major gap in project
design.
There was also a concern about the number of credit union-referred (potential) clients who
did not, in the end, take up the appointment offered at BAC. From the end-user beneficiary
interview findings, it seems that some of these cases involved people who were not in fact
seeking debt advice about a pressing problem but, rather, seeking more generic money
advice. Once the client’s financial situation had been stabilised via access to credit union
assistance and/or services, the need for such advice was reduced. This highlighted to project
participants the fact that not every financial problem or difficulty necessarily requires a
referral to a money or debt advice agency. Several interviewees noted how the basic
information supplied by the credit union debt support worker had been sufficient in itself to
assist them to sort out their problem.
There is a strong need
for preparatory support
to be provided by a
credit union before a
client’s attendance at an
advice agency.
An important issue raised by advisers concerning those who did take up the offer of a BAC
appointment was the lack of prior information given about the advice process to people
referred by the credit union. People arrived at BAC without any clear knowledge of the
nature of the service that would be offered, which inevitably caused confusion and
misunderstanding. This was confirmed by several beneficiaries in interviews. One person
noted that nobody at the credit union told him anything at all about what to expect at BAC,
while another felt that the lack of information given to her about the process resulted in her
lacking confidence in the quality of the advice on offer. This latter person ended up going to
a commercial debt advice company rather than to BAC.
It was clear from project experience that there is a strong need for preparatory support to be
provided by a credit union before a client’s attendance at an advice agency, in order to
reassure the referred person and to give information about the referral process and the
service they can expect in the referred-to organisation. In some cases, there may even be a
need for a credit union worker to attend the advice agency with the member in order to
ensure a supported introduction to the advice service via their presence at the first interview.
One referee stated that she felt that the link between BAC and SCU was not as joined-up or
as seamless as it could have been. She noted that there did not seem to be any interaction
between the two agencies in regard to those referred. In fact, as noted above, one element
contributing to this lack of interaction was the dearth of information received by the credit
union on the outcomes of BAC appointments. Limited data about outcomes was available
from BAC and, once people had been referred, the credit union received no further feedback
about their progress.
Some form of feedback on referrals was seen by the credit union as important in enabling it
to ensure a co-ordinated and supportive service. Of course, any feedback would be dependent
on obtaining the credit union member’s consent to allow the advice agency to share
information with the credit union. As noted above, positive outcome data relating to referred
clients, e.g. a credit union worker finds that a member they have referred to BAC has
negotiated a manageable system of debt repayments with creditors, makes the referral
process ‘worthwhile’, and reinforces to staff of both organisations the added value that
partnership brings.
A key aspect of the project, aimed at creating a seamless service, was the introduction of ringfenced or priority referrals. With the support of the funds provided by Barclays, a number of
referral places were reserved at BAC for credit union referees. For the project founders, this
enabled a joined-up service whereby credit union members could see an adviser without any
unnecessary delay. For some of the advisers, however, this was seen as “jumping the queue”
and as a “cardinal sin” against good advice agency practice. For these advisers, priority
referrals were only tolerated because of the additional income they brought into the agency.
37
jmu_64p
21/4/08
16:48
Page 38
However, on reflection, project participants, including some advisers, recognised that
ring-fenced allocations were one way of managing capacity and of enabling a more joined-up
service to beneficiaries in difficulty. It was also argued by some that direct or priority
allocation systems enabled more and better follow-up on cases after the client had returned
to the credit union, even though this did not take place during the SCU-MAP project.
The debate around ring-fenced allocations highlighted the central importance in any
partnership programme, as stressed by one adviser, of “getting the referral policies right”.
Efficient referrals to the advice agency and a well-organised appointments system were
revealed as critical to the success of this approach.
Despite the priority
referral system,
comments were still
made by some of those
interviewed that
appointments were not
always as speedy as
might have been
expected.
Despite the priority referral system, comments were still made by some of those interviewed
that appointments were not always as speedy as might have been expected. There were
sometimes quite lengthy delays. In other partnership programmes, systems have now been
developed to enable credit unions and advice agencies to allow mutual access to
appointment systems. In South Tyneside, for example, the credit union has now begun to
make appointments for members to see CAB debt advisers from the credit union’s own office.
CAB financial awareness workers based in the credit union can make CAB appointments
directly from the credit union.
In reference to the speed of appointments, there was some evidence from Twinpier that
people used the telephone service rather than the face-to-face service offered by BAC
because access was rapid as well as being anonymous, free and confidential. There were no
appointments or waiting time, which was important for people in work or with childcare
commitments. One useful and valued service offered by Twinpier was phone call-back. If
people made a call to Twinpier by mobile phone, their call would be returned, thus saving
their phone credit and limiting the expense they would have incurred to sort out their debt
problem.
However, in interviews, other beneficiaries considered face-to-face advice to be more
appropriate for them. Face-to-face advice was often offered to people with larger and more
complex debts, but the offer of referral to either service was in theory based on the personal
choice of the credit union member. However, with referrals to BAC being administered by the
debt support worker and those to Twinpier by loan officers themselves, there was evidence
that some of those referred to Twinpier by loan officers were not actually presented with the
opportunity of being referred to BAC. Nevertheless, having both options available was seen
as important to the development of a flexible and holistic approach to tackling
overindebtedness and financial exclusion. It must be remembered, though, that referrals to
BAC were limited by the terms of the project itself.
Referrals made by the advice agency to the credit union
People who attended BAC for advice or information were also able to learn about the credit
union. During the period of the project, about forty people became credit union members via
project activities, many of whom had either limited or no prior knowledge of the credit union.
Joining the credit union was often a major step towards financial inclusion and stability.
However, none of these new members were referred or recommended to join the credit union
by BAC debt advisers during the course of the advice process itself. Rather, they were
introduced to the credit union through the presence of the SCU debt support worker at the
weekly outreach sessions on BAC premises or through the leaflets and literature available in
the waiting area.
At most, BAC advisers informed clients of the option of joining the credit union, and provided
them with information about the outreach sessions. Advisers felt that they could not go as far
as making a positive recommendation to clients to join the credit union, even to those living
on low incomes and facing financial exclusion. For the credit union, which referred its
members to the advice agency, this lack of reciprocal referrals was often experienced as a
weakness in the partnership.
38
jmu_64p
21/4/08
16:48
Page 39
This feeling was exacerbated by the fact that debt advisers in other advice agencies, including
Twinpier, had no apparent difficulty in actively recommending that their clients consider
credit union membership. For Twinpier, for example, encouraging clients to open credit union
savings accounts was a key element in its strategic approach to long-term debt management
and combating financial exclusion. This approach was based on the understanding that
building savings and assets is fundamental to poverty alleviation and financial inclusion
(Sherraden 1991).
These diverging approaches to making advice agency referrals to credit unions surface
throughout the country. It is not uncommon for debt advisers to have reservations about
proactively recommending their clients to join a credit union, particularly if that referral is to
take place within the advice process itself. These reservations do not generally stem from a lack
of appreciation of the benefits of credit union membership for low-income consumers. BAC, for
example, recognised fully the advantages of credit union membership for people in Southwark.
Rather, they arise out of particular understandings of the complexities of the advice process.
It is not uncommon for
debt advisers to have
reservations about
proactively
recommending their
clients to join a credit
union, particularly if
that referral is to take
place within the advice
process itself.
At BAC, research interviews identified advisers’ reservations as relating to four key principles:
• belief in the independence of the advice agency and advice processes, which could
only be fully safeguarded by refusing to actively endorse any individual potential
creditor or creditor type
• the axiom that borrowing (more) money can never be a way out of over-indebtedness
• the view that it is not advisable for low-income clients to borrow and save within the
same financial institution
• an interpretation that a recommendation to a client to join a credit union could
contravene elements of financial promotions legislation as contained in the Financial
Services and Markets Act 2000.
Each of these four factors was examined with advisers, credit union personnel, and project
stakeholders. The findings arising from these discussions are summarised in the paragraphs
below. Given that contravening the financial promotions legislation is potentially a criminal
offence, and that advisers are unlikely to promote a credit union if it unlawful to do so, it is
perhaps apposite to commence with a discussion of this factor.
Financial promotions legislation
Section 21 of the Financial Services and Markets Act 2000 (FSMA) contains a prohibition on
financial promotions, and stipulates that a person must not, “in the course of business,
communicate an invitation or inducement to engage in investment activity”unless s/he is an
authorised person, or the content of the communication is approved by an authorised person,
or the communication is covered by an exemption. Debt advisers, unlike regulated
independent financial advisers, are not, of course, ‘authorised persons’ as defined by the
Financial Services Authority.
The definition of 'investment activity' is comprehensive, and relates to financial services as
well as products. It includes deposits, savings, pensions, endowments, insurances, shares and
unit trusts. It also includes mortgages, which are a form of credit but regarded as an
investment as they relate directly to a long-term investment in property or land.
However, it is important to note that the prohibition on financial promotions concerns
investment activity alone and does not relate to consumer credit and unsecured personal
loans. These are covered by the Consumer Credit Act, and not by the FSMA. So, for example,
a debt adviser recommending a credit union Growth Fund loan, which has no requirement on
the borrower to be saving in the credit union in question, would not fall within the scope of
the financial promotions regulation and would therefore not be contravening the legislation.
39
jmu_64p
21/4/08
16:48
Page 40
However, most credit union loans are made to members who save, make deposits or,
increasingly, have current accounts. Saving and the making of deposits in any form is
investment activity and therefore caught by the financial promotions regulation. Credit union
mortgages too, where they are provided, are clearly an investment activity. Under FSMA, to
promote any of these products, orally in one-to-one situations, in speeches, in writing, or even
through posters or leaflets, could possibly be regarded as a contravention of the legislation.
(see COBS 4, FSA 2007).
Not long after the implementation of FSMA, it became clear to Government and to the advice
sector generally, that the provisions of FSMA were having a negative impact on the provision
of debt advice, particularly in low-income communities. Debt advice and generic financial
advice often go hand in hand and, even by 2003, there was evidence that debt advisers were
often taking an overly cautious approach to helping clients with pensions, mortgages,
insurances and endowments because of fears of contravening the legislation.
Where uncertainty about
the effect of legislation
causes advisers to be too
cautious about the advice
that they give, this could
compromise the debt
advice services offered to
clients (HMT 2004b).
Credit union investment products were not considered at the time, but, had they been, they
too would certainly have been caught by the same cautious apprehension. The financial
promotions regime had been designed to regulate profit-making businesses and protect the
consumer from mis-selling by unscrupulous or untrained financial advisers. Ironically, through
the creation of a culture of apprehension among advice agencies, the result was that many
advice agency clients, often some of the most vulnerable people in society, missed out on
helpful information and advice about appropriate financial products that could benefit them.
In February 2004, HM Treasury implemented a review of FSMA, which included a specific
intention to address the needs of advice agencies. In its consultation document (HMT 2004b),
it asked whether it would be beneficial to create a specific exemption from the financial
promotions legislation for not-for-profit advice agencies. This would remove the uncertainties
that advisers faced under FSMA and provide clients with wider access to generic financial
advice. Even flawed advice, argued the Treasury, was better than nothing at all for clients who
required urgent specific advice as part of the debt counselling process.
In the review consultation document, the Treasury set out the reasons for the proposal of a
specific exemption from FSMA for advice agencies:“The case for creating a specific exemption for advice agencies is to enable them to carry on
their function effectively. The voluntary free advice sector is typically well trusted by the people
who use it and has an established infrastructure. Where uncertainty about the effect of
legislation causes advisers to be too cautious about the advice that they give, this could
compromise the debt advice services offered to clients who often require urgent specific advice.
In these circumstances, some advice (even if slightly flawed) may be better than no advice at
all”. (Section 3.11, HMT 2004b)
The result of the consultation process, which was widely promoted throughout the advice
sector, was a Government recognition that advice agencies needed to be provided with an
exemption from the FSMA financial promotions regime. According to the Government
response, advice agencies should be able to provide generic financial advice and “be able to
refer and/or introduce clients to authorised financial advisers and product providers, provided
advice centres receive no financial reward as a result” (HMT 2004c). In addition they should be
able to make available financial promotions in relation to mortgages, insurance contracts and
Child Trust Funds. The condition of this exemption was that it would only apply to non-profit
making advice agencies whose principal financial services activity was debt advice.
The advice would have to be free and independent and advice centres would have to hold
adequate levels of professional indemnity insurance.
In December 2004, following the consultation, ,Stephen Timms, the then Financial Secretary
to the Treasury, announced that “I will provide advice centres with an exemption from the
40
jmu_64p
21/4/08
16:48
Page 41
FSMA financial promotion regime to enable them to provide financial advice and other
debt-related support, such as assistance with applications, without advice centres having to
worry that they might be subject to the financial promotion restriction. This deregulatory
reform will enable advice centres to raise people’s levels of awareness and understanding in
financial matters, enabling them to manage their finances better” (HMT 2004d).
On the face of it, appeared as if this change in legislation would bring an end to advice agency
worries about being subject to the financial promotions regime. Indeed, Terry, Sinn and
Simpson (2006) concurred with Timms and argued that the “exemption from the FSMA means
that advice workers avoid having to worry that they might be subject to the financial
promotion restriction when assisting people with applications for financial products”.
Excessive caution might
also be regarded as
compromising the role of
the adviser in terms of
limiting their capacity to
capacity to both help
solve immediate and
pressing debt problems
and also assist the client
in moving towards
financial inclusion and
security.
However, things did not turn out to be so straightforward. The changes in financial
promotions legislation, as referred to in the Government’s response to the consultation, came
into force in the 2005 financial promotions order (HMT 2005). These changes were now
specified and clear. In Section 73 of the 2005 order, which deals specifically with advice
agencies, the financial promotions restriction does not apply to any communication that is
made by a person in the course of carrying out his duties as an adviser for, or as an employee
of, an advice agency, if the communication relates to qualifying credit; rights under, or rights
to or interests in rights under, qualifying contracts of insurance; or a child trust fund.
Qualifying credit is defined in the order (paragraph 10) as meaning a mortgage or credit that
is secured, in whole or in part, on land. The conditions attached to this exemption were that
advice agencies had to carry adequate professional indemnity insurance, offer advice that is
free and in respect of which the centre does not receive any fee, commission or other reward,
and which provides debt advice as its principal financial services activity.
There was no mention of savings or deposits, which therefore still come within the remit of the
financial promotions regime. This leaves, as at BAC, a situation where debt advisers are still
somewhat unsure of their position under FSMA in recommending or advising their clients to
join a credit union. 7
Of greatest importance is the issue of advising people on saving in a credit union, recognised
as a key element within the pathway to financial inclusion, and on making deposits into a credit
union current account. Credit union loans are, as noted above, not covered by FSMA legislation
but in most credit unions access to a loan account, with some notable exceptions, depends on
also having a member savings account. As at BAC, advisers should rightly be cautious in
recommending investment in a credit union. If an adviser actively recommends a credit union,
and that recommendation includes advice/information on savings or current accounts, the
adviser has technically crossed a line demarcated by the financial promotions regime.
Does this mean, therefore, as at BAC, that debt advisers have to be so cautious they can only
present a credit union as one option among others, that is, as being on a par with banks and
building societies? Does it mean that nothing can be said by an adviser that would introduce
or lead financially excluded clients to a credit union, which in reality may be one of the few
options open to them? Given the arguments of HM Treasury and other parts of Government
in the 2004 FSMA consultation review that debt advisers should not be so overly cautious
that financially excluded people fail to receive the advice they need, it would appear that a
cautious approach could result in actions, or a lack of action, that are not in the best interests
of the client.
Excessive caution might also be regarded as compromising the role of the adviser in terms of
limiting their capacity to not only help solve the immediate and pressing debt problem but
7 Advising people on credit union mortgages, as exempt in the 2005 order, is important but of limited significance. Less than 0.5%
of credit unions in Great Britain have the relevant permissions to offer mortgages.
41
jmu_64p
21/4/08
16:48
Page 42
also assist the client in moving towards financial inclusion and security. Twelve months after
receiving debt advice, the majority (84%) of clients participating in a recent research
programme stated that they felt more in control of their finances and more knowledgeable
about financial matters overall (Pleasence et al. 2006). Enabling people to feel more in
control and more knowledgeable about finance depends on the advice and active support
offered by the adviser, which probably means going beyond just offering a list of options
regarding the available types of credit and savings providers in the most general terms.
However, it seems clear that crossing the financial promotions line by recommending a credit
union to clients does lead advisers into something of a legal grey area. If an advice agency
were ever challenged, say by a client who made a deposit in a credit union and who
complained that the adviser did not make it clear that the dividend was less than the return
that was available from some high street banks, it might be claimed that the agency
contravened the financial promotions regime. If the client sued the advice agency for loss, the
advice agency’s insurers might be obliged to make an offer or pay the full amount sought.
Advice agencies are
established to act in the
interests of their clients,
and it is axiomatic that
they must be independent
from any external
pressures, including from
financial institutions.
Hence the importance of having in place appropriate liability insurance so that clients can be
compensated for any loss arising from the negligent provision of financial advice (cf. HMT
2005). However, venturing into this grey area is not without its defence. As was stressed in the
2004 consultation process, advice agencies are not-for-profit organisations and have no
interest in financial promotion other than supporting the clients with whom they work. The
key principle of all debt advice is to act in the best interests of the client, taking into account
all relevant factors including the client’s financial position (OFT 2001). Acting in the best
interests of financially excluded people may involve, in practice, crossing the financial
promotions line and introducing people with few other options to the benefits of credit union
membership.
The BAC advisers were right to be cautious, but being over-cautious may in the end have
unintended, counter-productive consequences. Appropriate caution involves presenting
credit union information fairly and independently (i.e. not as an agent of the credit union) and
highlighting the disadvantages as well as the evident advantages of membership. Moreover,
this would need to be done in the context of providing information about all other
appropriate financial options so that the client can freely choose from among them.
Some commentators consider that an adviser venturing into giving advice on financial
products should always be non-provider specific (Pearson 2004). This is not always practical
in the case of credit unions. It is very rare for there to be a choice about which credit union to
join as there is usually only one serving a particular locality. In the context of a low-income
community, advice about credit unions in general is normally, de facto, advice about a specific
credit union.
It is to be hoped that the Thoresen Review of generic financial advice 8 (HMT 2008) does not
lead to the possible unintended consequence of putting the regulatory boundary under closer
scrutiny and thus jeopardising existing, less over-prescribed arrangements in which advice
agency recommendations to clients to consider a credit union act in the overall interests of
financially excluded people.
Advice agency independence and links with a potential creditor
Advice agencies are established to act in the interests of their clients, and it is axiomatic that
they must be independent from any external pressures including from financial institutions,
particularly those that may be potential creditors of their clients. Despite the fact that the
2005 financial promotions order (HMT 2005), which gave advice agencies certain
exemptions from FSMA, did not mention the concept of independence, all the documentation
8 Now to be known as money guidance.
42
jmu_64p
21/4/08
16:48
Page 43
that led to that order, including the government response to the FSMA two-year review,
stressed that advice had not only to be free but independent (HMT 2004c). It was a concern
to safeguard the independence of the debt advice process, and of the advice agency itself,
that led BAC advisers to be wary of proactively recommending the credit union to their clients.
As one adviser explained, “I cannot be seen to recommend any creditor”.
There is one scenario in particular that that illustrates the importance of advice agency
independence and a potential risk to it. However, as no proactive referrals were made by BAC
to SCU, the scenario remained hypothetical in this specific context, which in no way
diminished the influence of the issues it raised on the approach of advisers to the advice
agency’s relationship with the credit union.
The issue of a money
adviser’s approach to
credit union loan
default presents credit
unions with a dilemma.
The issue was that of default on a credit union loan by a client previously referred by an
adviser to a credit union. If, following default, the client returned to the advice agency for
further advice, the BAC adviser would want to be able to advise on the credit union debt in
exactly the same way that s/he would advise on any non-priority, unsecured debt to any
creditor. The adviser would not want to be in the position of having to make a special case for
the repayment of a credit union loan and certainly would not want to feel any pressure to give
the credit union any priority over other creditors.
Yet, this issue of an adviser’s approach to subsequent loan default presents credit unions with
a dilemma. For the credit union, supporting a referred client with access to a loan is seen as
one intervention, alongside others, aimed at moving the person along a pathway into
financial stability (Jones 2006). For the credit union, enabling people to progress on this path
depends on the collective engagement of both the advice agency and of the credit union.
If having introduced a person to a credit union, the advice agency regarded subsequent
default as a stand-alone situation in which the credit union had no more claim than any other
creditor, the credit union would tend to regard this as potentially undermining, not only to the
credit union, but to the financial inclusion process itself.
The credit union expectation would be that the advice agency would encourage the defaulting
client, who probably has no access to mainstream financial services, to regularise the default
by agreeing a new reduced repayment schedule and to continue to save and borrow within the
credit union. Otherwise, the credit union would argue, the client risks losing an important line
of affordable credit and would have limited credit alternatives. The dilemma for the credit
union centres on the question of its ability to accept referrals from an agency, on the basis of a
joined-up approach to supporting a financially excluded individual, if, on default, the credit
union’s status is reduced to being just simply one creditor amongst many.
In the ‘wider world’, there are examples of advice agencies that, unlike BAC, agree to work
with a credit union in such a way that a referred person’s default on a loan is treated
differently from other creditor debts. South Tyneside CAB, for example, takes the view that,
if a referred defaulter returns to the bureau for further advice, the client can receive ongoing
support if, and only if, s/he is able to demonstrate that the default was due to “an inability to
repay through a new financial hardship situation, rather than lack of willingness to keep up
payments“ (Jones and Rahilly 2006).
In South Tyneside, the original referral is regarded as part of the solution offered by the
bureau to improve the client’s financial situation, and only if there are new pertinent factors
to be considered can the bureau reopen the file. Otherwise the client is encouraged to keep
up repayments to the credit union and to continue to follow whatever saving plan was
agreed. The bureau regards this position as a necessary element of a co-ordinated credit
union and advice agency approach to promoting individual financial inclusion. However,
when other pertinent factors do exist, the bureau will act always in the best interests of its
client. In cases of genuine hardship, the bureau will have to ensure that clients attend to
priority debts first and foremost.
43
jmu_64p
21/4/08
16:48
Page 44
Positions taken on the subsequent default of referred clients reveal the varying approaches
taken by advice agencies to the concept of independence in relation to working with credit
unions. These positions seem to range, as in the case of financial promotions above, from the
cautious to the over-cautious. Clearly, all advice agencies have to act cautiously if they are to
remain independent and also need to ensure that they act, first and foremost, in the interests
of their clients. They can never become an agent of the credit union nor allow the priorities of
the credit union to override their own.
However independence is
understood by
participants in
partnerships, it is clear
that each organisation
needs to ensure that its
respective role and
responsibilities are clearly
defined and agreed in a
way that does not
compromise the interests
of its clients.
However, South Tyneside CAB would argue that although it took a cautious position, this did
not prohibit them from pursuing a co-ordinated course of action with a credit union to offer
its clients the support they needed (cf. HMT 2004c) through a holistic approach to promoting
financial inclusion. Clearly, there may be occasions, where on the basis of new factors and
situations, an agency such as South Tyneside CAB has to assert its independence and take
actions on behalf of its client that may be against the wider interests of the credit union.
Yet, in normal circumstances, it does not regard its independence as being compromised by
working closely with the credit union to offer an integrated approach to tackling the financial
exclusion of its clients.
BAC had a different understanding of advice agency independence and tended to take a more
cautious, if not over-cautious position, which avoided referring clients to the credit union at
all. This effectively circumvented any referrals returning to the agency for advice on credit
union default and prevented any expectation on the part of SCU that credit union loans
would be dealt with differently. BAC was clear that its advisers treated credit union debts in
exactly the same way as debts to any other non-priority creditor (see Section 6, Facing
dilemmas, for further discussion of advice agencies and credit union debts).
It is clear that there are varying interpretations of the question of advice agency
independence, but not necessarily any right or wrong answer. Independence is a fundamental
principle underpinning advice agency practice, as it is of credit union operations (see the
discussion on credit unions as community businesses below). Yet an understanding of what
independence means in practice has to be forged through specific partnership dialogue,
negotiation and experience, on a case-by-case basis.
As a simple comparison of the SCU-MAP and South Tyneside partnerships demonstrates,
advice agency approaches to defining and safeguarding independence can lie anywhere
along a continuum from a very cautious, quasi-‘separatist’ approach to more flexible notions
of close and integrated working relationships. At one end of the continuum, the advice agency
and the credit union retain very separate positions, with only certain collaborative actions in
place, whereas at the other, the two organisations are engaged in harmonising operational
practices, joint training and development programmes, and even participate in combined
promotional and marketing strategies.
However independence is understood by participants in partnerships, it is clear that each
organisation needs to ensure that its respective role and responsibilities are clearly defined
and agreed in a way that does not compromise the interests of its clients. Wherever the
partnership is positioned along the independence continuum, research has highlighted the
importance of clear protocols and procedures, service level agreements, or terms of reference
that delineate the way the two organisations will work together as partners (Rahilly and
Jones 2006, ABCUL 2008).
The lack of a written service level agreement or terms of reference between BAC and SCU did
not help in clarifying, particularly for front-line staff, the basis on and methodologies
according to which the two organisations worked together. A clear and agreed definition of
mutual roles and responsibilities would probably have resulted in the issue of independence
being less of a concern among BAC staff.
44
jmu_64p
21/4/08
16:48
Page 45
Yet, as was noted by one of the senior workers at BAC, delineating written roles and
responsibilities is only one aspect of the development of effective partnership working.
Collaborating on the creation of a pathway to financial inclusion has to be based on a high
level of common understanding, trust and openness between the two organisations.
This observation by BAC was, in fact, reinforced by the research into the South Tyneside
partnership, which identified trust and mutual strategic understanding as key elements on
which the success of the relationship was based (Jones and Rahilly 2006). As BAC advisers
recognised, the partnership with SCU was short in duration, and perhaps the level of trust and
understanding required for a more flexible, less cautious approach to the relationship did not
have sufficient time to be developed. With greater trust, the issue of independence becomes
more manageable and less of a barrier to developing an effective partnership.
Borrowing to get out of debt
There are money advisers
who would argue that
ruling out borrowing
altogether for people who
are already overindebted
is too strong a position to
take.
BAC advisers were also cautious about recommending that clients join the credit union
because of a concern that this might have been taken as a recommendation to enter into
further debt. Not only did advisers strongly counsel people against trying manage their debts
by borrowing more, but they also endeavoured to assist all those in debt to move away from
a culture or a habit of borrowing. This was regarded as a key factor in enabling people to
achieve financial stability. As one adviser put it, “Someone in debt needs to go through a
period of having no credit at all”.
It is axiomatic among many debt advisers that, if someone is in debt, they should never
borrow more money, particularly in an attempt to reduce pre-existing debts. This axiom has
been fundamental to traditional adviser training for a long time. On the Motley Fool website,
for example, D’Arcy (2006), writing of people who try to reduce debts through consolidation
loans, argues, “You can't get out of debt by borrowing more. This sounds blindingly obvious,
but millions of borrowers have yet to grasp this basic fact: if you want your debts to reduce, you
have to stop borrowing, full stop. It's as simple as that”.
Indeed, there is plenty of evidence to suggest that the apparently easy option of borrowing
to reduce debt repayments has lulled many people into a false sense of security. In addition,
massive advertising of consolidation loans by sub-prime companies has led many to take out
secured loans against property that may turn out not to be in their long-term interest,
because of the potential risk to borrowers’ homes.
It is also true that some credit unions have on occasion offered further borrowing as a solution
to debt problems with undue haste. Such behaviour would probably be regarded by BAC
advisers as supporting their caution over recommending further borrowing to those already
overindebted. Research (Jones 2003) into early examples of credit union loan guarantee
schemes, for example, demonstrated how easy access to further borrowing did not always act
in the long-term interests of the borrower. Not only did such access not solve issues relating
to deep-seated overindebtedness and poor money management, but it also resulted in high
levels of delinquency that closed off further access to credit union loans for financially
excluded people.
On the SCU-MAP project, there were examples of SCU granting loans for tenants to pay off
rent arrears without first referring them to BAC. Research shows that rent arrears often mask
other more complex and deep-rooted debts. Nixon and Hunter (1996) argued, for example,
that rent arrears were commonly the result of multiple debt problems. Similarly, research
undertaken by Glasgow University and Heriot-Watt University for the Office of the Deputy
Prime Minister underlined the fact that rent arrears were often the result of increasing rates
of multiple debt (Pawson et al., 2005). BAC advisers would argue that debt advice to help
clients negotiate the repayment of outstanding rent arrears is usually the best way forward
rather than contracting a loan to pay off the arrears as a lump sum, not least because rent
arrears do not generate interest.
45
jmu_64p
21/4/08
16:48
Page 46
However, unlike at BAC, there are advisers in the wider world who would argue that ruling out
borrowing altogether for people who are already overindebted is too strong a position to take.
They would be likely to take this view for at least two key reasons. First, the reality is that
people on low incomes, even if already overindebted, still depend from time to time on further
credit to cope with emergencies or to manage the household budget (Jones and Barnes
2005). These advisers would contend that, given the immediate debt crisis is resolved and the
person is on a path to financial stability, then it is preferable for them to have a line of credit
open in a credit union rather than having little choice, in case of necessity, but to return to
high-cost alternative credit providers.
During the SCU-MAP
project, BAC advisers
mostly assessed the
benefits or otherwise of
credit union membership
in terms of access to
credit. In other words, the
credit union was regarded
primarily as a lending
organisation.
Secondly, even though advising clients to be wary of borrowing more money to reduce or pay
off existing debts is evidently good practice, there may be certain circumstances in which
settling or reducing a debt with a further loan proves to be a successful tactic. An adviser may
negotiate, for example, a full and final settlement figure with creditors, where the immediate
repayment of the debt reduces it significantly. In such a case, a credit union loan to settle the
debt at the agreed figure would be in the best interests of the client.
Nationally, there are an increasing number of schemes whereby, with the support of an advice
agency and credit union (or Community Development Finance Initiative [CDFI]) working in
partnership, people are freed from high-cost loan repayments through debt consolidation
loans (Jones and Rahilly 2006). For example, the partnership between South Tyneside Citizens
Advice Bureau and a CDFI, Money Answers South Tyneside (MAST), has enabled people to
reduce their existing high-interest repayments with consolidation loans (Jones 2008).
Settling a debt with a loan may be beneficial if it assists a person to free themselves from the
habit of using high-cost sub-prime lenders and, instead, to develop a savings and borrowing
history within a credit union. There were several examples of this in the MAST project in South
Tyneside (Jones 2008). Such a loan is, of course, neither appropriate in every case nor for all
forms of indebtedness (a home credit loan is rarely, for example, worth repaying with a
consolidation loan, unless a remarkably low settlement figure is agreed, as it would mean
the borrower paying interest on the interest already paid to the home credit company).
But, where appropriate, the success of such schemes is dependent on a high level of cooperation and data sharing between the advice agency and the third sector lender. In order
to access a MAST consolidation loan, the borrower is obliged to meet several times with the
credit union loan officer and also with the CAB debt adviser in order to ensure that all aspects
of a person’s overindebtedness are explored and a debt payment strategy established.
There is one important set of cases, however, regarding which neither a credit union nor a
CDFI consolidation loan is likely to have any significant impact. These cases involve situations
where the amount of overindebtedness far exceeds third-sector lending capacity. MAST loans
can usually be made up to a ceiling of £5,000 and credit union loans, in many cases, would be
smaller than that. At BAC, the average amount of debt that individual clients held was often
in excess of £30,000.
In such cases, as recognised by BAC advisers, even if a consolidation loan were accepted as a
possible way forward, a relatively small credit union loan would be of little help. In general,
it should be recognised that the high levels of indebtedness of individual BAC clients
influenced how advisers assessed the value of directing their clients to the credit union.
Specifically, debt advisers were sceptical about the capacity of the credit union to assist
heavily-indebted clients because of the effective cap on the credit union’s lending capacity.
As noted in the section on beneficiaries above, loans were made by SCU to settle rent arrears.
It is conceivable that there are cases where the repayment of rent arrears with a loan could
be in the client’s best interests if all other measures have been exhausted and such a course
of action alone prevents eviction. However, advisers would strongly argue that there were
very few circumstances in which an eviction could not be avoided by good advice rather than
a settlement.
46
jmu_64p
21/4/08
16:48
Page 47
During the SCU-MAP project, BAC advisers mostly assessed the benefits or otherwise of credit
union membership in terms of access to credit. In other words, the credit union was regarded
primarily as a lending organisation. Those with contact with the project at the advice agency
were debt advisers, rather than more generalist advisers, and hence any referrals, if considered
at all, would have been referrals for loans.
Given the concerns regarding the wisdom of overindebted people taking out further loans, it
was not surprising that referrals, as such, did not happen. In many ways, it is ironic that the
debt adviser focus on encouraging people to move away from a culture of borrowing did not
lead advisers to recommend their clients to open credit union accounts for the purpose of
saving. In the long term, it is saving rather than borrowing that moves people along the path
to financial stability and inclusion (Sherraden 1991, Kober and Paxton 2002).
Transaction, savings and loan accounts in the one financial institution
People joined SCU for
more reasons than access
to credit. In the interviews
with beneficiaries, it was
the ability to save in the
credit union that was
often valued the most.
The focus of debt advisers on the credit union as a lending organisation clearly contributed
to the lack of proactive referrals to it. However, in other advice agency and credit union
partnerships, the dynamics of the inter-relationship go beyond debt advice and access to
credit. Money and debt advice workers, housing advisers, and generalist advisers feel
confident in recommending the credit union, not just as a lender, but often more importantly,
for access to savings and current accounts, benefit direct accounts and insurance products.
In fact, this wider promotion of financial inclusion is often more relevant than a concentration
on credit alone. Financial inclusion is as much about access to transaction and savings
accounts as it is to affordable credit.
In reality, at BAC, through the outreach sessions and the interventions of the SCU debt
support worker, the credit union was marketed as an organisation that could assist people
with savings, loan and current accounts. The result was that people joined SCU for more
reasons that access to credit. In the interviews with beneficiaries, it was the ability to save in
the credit union that was often valued the most. The problem was that the message regarding
the breadth of credit union products and services was not always communicated throughout
BAC to all its adviser teams.
In research discussions with debt advisers, another problem surfaced that militated against
proactive referrals. This problem was based on a doubt among debt advisers regarding the
wisdom of low-income clients saving, borrowing and having their current account all in the
same financial institution. Among debt advisers, it is fairly standard advice to overindebted
clients to recommend that their current account is not in a bank that is a potential or actual
creditor.
Banks have the right of set-off and can claim funds from a current account, with prior
permission, to pay existing debts to the bank. In reality, credit unions have the same right as
any non-third sector lender given that borrowers agree to such a right when taking out a loan.
The worry was that the credit union would exercise its right of set-off and make deductions
from the savings and current accounts of its low-income borrowers if they fell into default on
loans. The standard money advice position aims to preserve the control of the person in debt
over funds by means of their maintaining an account independent of all creditors.
There was a concern among BAC debt advisers that, if low-income clients kept all their funds
in a credit union and, for whatever reason, defaulted on a loan, then the income on which they
depended to live would be at risk. This concern was exacerbated by the news of the Eligible
Loans Deduction Scheme that, as of December 2006, allows third-sector lenders to apply to
the Department of Work and Pensions (DWP) for direct payment of deductions from the
welfare benefits of those who default on loans (DWP 2006). This is, of course, in turn
contingent on the borrower’s agreement at the time of taking out the loan, which in reality is
always forthcoming.
47
jmu_64p
21/4/08
16:48
Page 48
The standard advice not to save, borrow and have a current account in a single financial
institution is certainly appropriate for large numbers of people who are, or could become,
overindebted to a bank and require the flexibility and security of an account in another
financial institution. However, for financially excluded people with little or no choice
regarding the financial services that they are able to access, this standard advice may not
always have the same applicability.
Operating a lending institution in the low-income market is risky, and a credit union needs to
retain the flexibility to employ all appropriate means available to protect its assets and
members’ savings. Having benefits or wages paid into a credit union can ensure a line of credit
for high-risk borrowers who would have little alternative but to use high-interest sub-prime
lenders. For financially excluded members, having savings, a loan and a current account
housed in one credit union can be a real step towards financial inclusion. It offers the credit
union a certain security against future credit repayments and enables the members to access
financial services and products that would be unavailable to them elsewhere.
Operating a lending
institution in the lowincome market is risky,
and a credit union needs
to retain the flexibility to
employ all appropriate
means available to
protect its assets and
members’ savings.
However, the appropriateness of anyone having all their financial services in a credit union
depends on the trustworthiness, integrity, high ethical standing, and indeed the capacity and
efficiency of the organisation concerned. The concern of the BAC advisers revealed that credit
unions had still some way to go to gain their confidence and trust. As people begin to use
credit unions as their sole financial provider, the challenge for credit unions is to ensure that
they do not replicate the mainstream and that they treat people fairly. Of course, there is
nothing to stop members moving their wage or benefit deposits from the credit union to
another financial institution if they considered it to be in their longer-term best interests.
Making referrals
BAC took a particularly cautious stance in relation to making referrals to the credit union.
Wider consultations within the advice sector, however, reveal that many advice agencies take
the view that proactive referrals are in the best interests of their clients and are to be
encouraged. Evidence from the ABCUL and Citizens Advice CONNECT project suggests that
cross-referrals between credit unions and advice agencies are a common feature of
partnership arrangements.
However, even when advice agencies do make referrals, it is clear that a number of issues still
arise. The issues that have surfaced in the course of research discussions with advice agencies
and credit unions throughout the country include:
Client expectations. Advice agencies can sometimes risk providing their clients with
unrealistic expectations regarding the assistance that can be given to them by the credit
union. One agency in the North of England, for example, referred a client who was £60k
in debt for a consolidation loan. Advice agencies need to understand how credit unions
work and the limitations within which they operate.
Credit union independence. Advice agencies can sometimes give clients the impression
that a credit union will automatically be able to provide them with a loan. It has to be
recognised that credit unions are independent financial organisations that must take full
responsibility for assessing loan applications and making loan decisions. On some
occasions credit unions have granted loans on the recommendation of advice agencies
alone. At least two credit union respondents in the research noted that such loans tend to
become delinquent very quickly, i.e., unsurprisingly, non-qualified loan assessments are
likely to significantly increase the risk of default.
Credit unions must have their own rigorous credit administration processes in place if loan
granting is to be effective. However, a good partnership arrangement will aim to offer the
client a seamless service into financial inclusion. There is no reason, given the requisite
48
jmu_64p
21/4/08
16:48
Page 49
safeguards and the agreement of the client, why the advice agency and the credit union
should not share data regarding clients’ financial information and credit scoring as part of
the loan assessment process.
Credit unions as co-operative businesses. Advice agencies sometimes misunderstand
the purpose of a credit union. A credit union is a co-operative and mutual financial
enterprise established to serve its membership. It is not a charity. There have been
examples, for example, of advice agencies directing clients to a credit union to obtain a
loan to cover a bankruptcy fee. Equally, agencies have sometimes sent people with
evident lack of capacity to repay to request a Growth Fund loan.
Providing induction to all
relevant personnel
regarding the purpose,
operation, and demands
of credit union and advice
Credit unions have to ensure that they lend only to those who have the capacity and will
to repay, and can never operate as a charity, even when presented with the most extreme
cases. The administration of the DWP Growth Fund is rigorously monitored by Government
and, even here, the credit union has to meet certain fixed lending targets, including those
that apply to loan default. It is important that the advice agency recognises that credit
union has the right to refuse membership of the credit union, and to refuse a loan if
granting it is not judged to be a prudent use of members’ or government money.
Dealing with default. Advice agencies sometimes do not seem to understand the impact
of loan default on the operation and long- term sustainability of a credit union. The advice
agency, in consultation with the credit union, needs to decide an effective policy in
relation to dealing with referred clients who default on loans to the credit union.
agency partnership
emerged as essential to
its success.
Staff induction and training
Providing induction to all relevant personnel regarding the purpose, operation, and demands
of credit union and advice agency partnership emerged as essential to its success. The SCUMAP project was initiated with a series of meetings and briefing sessions, mostly directed at
the managerial staff of both organisations. However, due to organisational constraints, this
programme of induction did not continue, and a limited number of staff members, particularly
those on the front line, were inducted into the vision, purpose or goals of the project.
At the end of the project, debt advisers still demonstrated a lack of understanding about
credit union principles and practice, and their concerns about partnership working often
remained unexplored and unaddressed. Equally, in the credit union, loan officers, who tended
to relate well to Twinpier given the pre-existing relationship, professed a lack of familiarity
with BAC and what it could offer.
In confirmation of this lack of adequate induction, one adviser wrote, “I think it would have
been good for both the Credit Union and Blackfriars to do a presentation to the staff at each
agency on the work we both do to make it clear from the outset. Some of the referrals which
were made to Blackfriars were not really money advice appointments (often more budgeting
and/or financial advice) and I think we should have done a short "Money Advice Awareness"
session with them so they had a better understanding of what we do and how we work”.
A significant consequence of insufficient induction and training of front-line staff was that,
over the period of SCU-MAP, responsibility for its operation tended to devolve progressively
to the part-time debt support worker. A common sense of purpose and shared engagement in
the project failed to emerge among most BAC and SCU staff members. The same was true at
board and trustee level in both BAC and SCU. The result was that, when the original founders
of the project left early on in the project’s life, momentum waned markedly.
49
jmu_64p
21/4/08
16:48
Page 50
However, the project achieved some significant outcomes for individual beneficiaries bearing
in mind its limited resources. It also stimulated a debate and generated important learning
outcomes about partnership working. Both these latter elements continue to resonate and
have an ongoing contribution to make to continuing discussions in this area.
It was acknowledged that more would have been achieved if a co-ordinated and planned
programme of staff induction and training had been implemented and sustained. Staff in
each organisation needed to collectively explore the meaning of the project in terms of what
it contributed to meeting the ethical goals that informed their choice of profession if it was to
add value to their daily working practices.
Subsequent reflection by staff and stakeholders identified that staff induction and training
were required at three distinct levels. These can be termed the philosophical, the practical
and the specialist, and are described as follows:-
Reflection by staff and
stakeholders identified
that staff induction and
training were required
at three distinct levels:
the philosophical, the
practical and the
specialist.
The philosophical level
Training at this level should involve an exploration of the underlying values, principles and
organisational culture that underpin advice agency and credit union operations. It would
address varying perceptions of financial exclusion and explore the bases on which credit
unions and advice agencies are able to promote financial inclusion collectively. It should
also offer the opportunity of examining the complex issues and dilemmas that often arise
for advisers and credit union staff when their respective organisations connect in
partnership programmes.
Issues for exploration might include the independence of advice agencies and the
appropriateness of their recommending a financial provider, the validity of the credit
union pathway to financial inclusion, the significance of saving and borrowing in the lives
of already overindebted clients, the role that current accounts can play in promoting
financial inclusion, and the status of credit union loans in the debt resolution process.
It is at the philosophical level that varying values, principles, cultures and agendas can be
revealed, acknowledged and accepted. Values and principles may differ but, if addressed
in the context of mutual respect, it is at this level that a common vision and approach can
be forged, and trust and confidence between partners established and strengthened.
The challenge for partnership participants at the philosophical level is to identify those
principles and values that are fundamental and sacrosanct to the overall approach of
individual organisations and those that are open to discussion, interpretation and
negotiation. This is not easy, since, for example, different advice agencies may take
distinct approaches to the concept of independence. For some, independence represents
an immovable and non-negotiable concept, while for others it may be subject to a degree
of flexibility of interpretation.
For all money advisers, though, it appears fundamental that credit union loans are
non-priority debts, despite credit union concerns to keep a line of credit open even for
those facing financial distress. For credit unions, access to savings, loans and current
accounts in one financial institution is fundamental to a holistic approach to financial
inclusion. For advisers, this assumption is open to debate and subject to critical analysis.
The practical level
Induction and training at this level relate to the operational policies and procedures
through which an effective joined-up service is delivered by advice agencies and credit
unions, and these processes are concerned both with the referral process and the
practicalities of appointment systems, and also the range of services available at both the
credit union and advice agency and how these can be accessed.
50
jmu_64p
21/4/08
16:48
Page 51
A key finding from this research project was that advice agencies can benefit from
induction relating to the range of financial products and services offered by credit unions.
Project progess tended to be hampered by advisers over-emphasising the role of credit
unions as providers of credit. A wider understanding of the role of current accounts,
savings and insurance may encourage the brokering of access to the credit union for
greater numbers of money advice clients.
Equally, the research revealed the need for credit union staff to understand the dynamics
of debt advice and its distinction from more generic financial advice or money guidance.
Had this understanding been in place, it may have enhanced the quality of referrals to
BAC in particular.
The specialist level
The project revealed the
importance of having
staff members in credit
unions and advice
agencies who are well
informed about the
principles and operations
of their respective partner
organisations.
The project revealed the importance of having staff members in credit unions and advice
agencies who are well informed about the principles and operations of their respective
partner organisations. Consultations with credit unions around the country noted that
partnership projects were particularly successful in situations where advice agency
representatives were on credit union boards or vice versa.
In some credit unions, staff are trained in debt and money advice. This approach is not
intended to replace the role of skilled advisers, but to enable credit union staff to be
‘problem noticers’, i.e. to be able to recognise indicators of debt problems among their
membership and to make referrals appropriately. Problem noticers based in credit unions
are then able to assist other credit union staff to understand the role and principles of the
money and debt advice process. This can assist staff to support referred members with
preliminary information and to ensure that people who could benefit from money or debt
advice are not overlooked.
The same approach would also be effective in advice agencies. Having advisers who are
knowledgeable about credit union services, principles and operations can increase the
awareness of credit union issues throughout an advice agency. Their knowledge can
contribute to defusing misunderstandings and ensuring that the maximum benefits of
partnership working are achieved. It should be noted that the SCU debt support worker
regarded the most significant difficulty she faced as being the lack of knowledge about
the credit union among front-line money advisers.
Organisational capacity
Despite its limited scale, SCU-MAP still made demands on the organisational capacity of both
BAC and SCU, and to some extent, also on Twinpier. The project depended entirely on
external funding even though it was not a particularly large-scale programme. It was limited
to the employment of a part-time credit union debt support worker and to the provision of
credit union priority appointments at BAC and Twinpier. With the ending of external funding,
BAC was unable to continue to offer priority appointments and the role of the SCU debt
support worker was terminated. Referrals to Twinpier from SCU have continued, albeit at
lower levels.
Organisational capacity surfaced as an issue in four key areas:Advice agency capacity
BAC’s offices are located in an area of extreme and multiple deprivation, and the
organisation has experienced a rise in demand for its services, in line with the general
increase in the level of overindebtedness in society. BAC operates an open-door advice
service, in addition to booked appointments. Normally, prioritised referral systems are not
encouraged, even though such a system was piloted during the SCU-MAP project.
51
jmu_64p
21/4/08
16:48
Page 52
Since SCU-MAP ended, BAC has lacked the capacity to ring-fence referrals and no longer
offers an individualised service of this nature to the credit union. However, it is clear that
partnership working depends both on a reliable method of credit unions being able to
access advice agencies’ appointments system and also on the possibility of effective
mutual interaction on referrals.
Information from the CONNECT project (ABCUL 2008) indicates that some Citizens
Advice Bureaux offer a dedicated emergency helpline for credit union clients. In other
places, debt advice outreach services are offered that a credit union member can access in
the credit union on particular days. However, in general, what seems essential is that the
credit union and advice agency are very clear with each other about how credit union
referrals broker access to advice, so that the credit union can explain the advice agency
offer to the person they are referring.
The money advice project
assisted Southwark Credit
Union in embedding
money and debt advice
into its lending
administration process.
A prioritised referral system demonstrated the possibility of offering those referred a more
seamless service. However, it is clear that prioritised referral arrangements are often likely
to depend on additional, dedicated funding that will increase organisational capacity.
Nevertheless, around the country, credit unions and advice agencies have been able
to develop working arrangements, based on existing resources that allow for people to
be seen on a referral basis, even if this did not entail ring-fenced solutions. The
ABCUL/Citizens Advice Connect Project has identified a number of examples of referral
systems that can be maintained without external subsidies (ABCUL 2008).
Credit administration
SCU-MAP assisted SCU to embed money and debt advice into its lending administration
process and build on its existing practice of referring overindebted members to telephone
debtlines. The project allowed the credit union to employ a part-time dedicated debt
support worker, who worked closely with the loan officers to offer assistance to people
seeking loans or help from the credit union. There was evidence from beneficiary
interviews that the debt support worker added value to the credit administration
process and encouraged members, particularly those deep in debt, to take up referral
opportunities.
However, the debt support worker post was part-time only and, in many ways, this meant
that the incumbent was unable to maximise the potential that such a role in a credit union
might have afforded had the post been full-time. For example, there was insufficient
capacity to introduce systematic pre-referral support procedures for overindebted
members or to offer the kind of intensive support, e.g. attending first advice agency
interviews, that many members would have benefitted from. Follow-up on the outcome of
referrals was equally intermittent and did not benefit from an inter-agency system of
information sharing.
Despite this resource limitation, there was some evidence from interviews with credit
union staff that the introduction of the debt support role had contributed to
strengthening the capacity of the credit union to become more rigorous in credit
assessment and loan granting. A loan was not seen as always in the best interests of an
already overindebted applicant particularly when the opportunity for money and debt
advice existed.
However, there was a degree of concern expressed by some advisers that this had led to
the credit union to decline an increasing number of loans in favour of making referrals.
The view was expressed that some of these applicants would have been granted
loans in the past and, despite their overindebtedness, would have prioritised their
repayments. However, no statistical evidence was available to support this view.
Nevertheless, the project did point to the debt support role as part of an effective credit
administration process.
52
jmu_64p
21/4/08
16:48
Page 53
Generic financial advice
BAC offers a money and debt advice service. It enables people in debt to explore and
access various debt remedies and assists them with money advice aimed primarily at
income maximisation and assisting with a range of ‘crisis’ issues and concerns. However,
what was clear from interviews with beneficiaries was that some of those referred for debt
advice were actually seeking generic financial advice or money guidance. As defined by
the FSA, they were looking for help “to identify and understand their financial position and
their needs and to plan their finances accordingly” (FSA 2005).
Most of this latter group of referred people were not seeking support with a present crisis,
but rather assistance that would support them to plan to become financially stable and
avoid overindebtedness in the future. They were looking for financial advice that would
cover issues such as basic budgeting, money management and planning ahead, making
choices in the financial market, and for basic information on saving and current accounts.
What was clear from
beneficiaries was that
some of those referred for
debt advice were actually
seeking generic financial
advice or money
guidance.
The absence of generic financial and budgeting advice was an important gap in terms of
meeting any high-level aspiration to providing a fully comprehensive ‘financial inclusion’
service. However, it should be acknowledged that there is evidence from other sources
that assisting people to negotiate with creditors and reschedule debt repayments can, of
itself enhance money management skills. This gap was recognised by all three partners,
but it was beyond their current capacity to respond adequately to it, and equally, it should
be acknowledged that such a lofty aspiration was not an expressed project aim.
With its commitment to debt advice, BAC did not see generic financial advice as part of its
role. Equally, as a provider of financial services, SCU did not see such work as falling within
its remit or range of competence. Nonetheless, it was clear from interviews that generic
financial advice was an important unmet need of some of the people approaching the
project for assistance.
The need for generic financial advice has been recognised by the money advice sector and
Citizens Advice, for example, has pioneered its Moneyplan project (CA 2007) as a pilot
programme in around 28 bureaux throughout the country. The model of delivery that was
adopted involved a regulated independent financial adviser (IFA) providing advice by
appointment in bureau premises or elsewhere, usually once a week. However, there is a
case to be made for money advisers (i.e. those currently focusing on debt) to be given
training to enable them to offer basic unregulated financial advice of the type that was
sought by some of the beneficiaries of the SCU-MAP the project.
This is the kind of supportive and preventative advice envisaged in the Thoresen review
(HMT 2007b, 2008), which, in an environment not linked to product sale, would enable
people to make financial decisions, take charge of their affairs, and plan for the future.
As discussed in the section on managing referrals above, unregulated advice “stops short
of recommending a product with a specific provider”(HMT 2007b). However, if promoting
such a service had the unintended consequences of advisers becoming over-cautious
about crossing the regulatory boundary to the extent of failing to communicate the
benefits of credit union membership to financially excluded people, this would be a loss all
round. Building the capacity of advice agencies, or others, to offer generic financial advice
needs to be done with careful consideration of the real needs of and practical options for
financially excluded people.
53
jmu_64p
21/4/08
16:48
Page 54
Financial capability education
It was clear from interviews with end-user beneficiaries that financial literacy and
capability were issues of importance on a par with the need for generic financial advice.
Among some credit union members there was still confusion as to how the credit union
operated and how best they could use the services of advice agencies. Although the
project was not a financial capability initiative, its engagement with overindebted and
financially excluded people inevitably revealed the importance of financial capability
work as a means of enabling beneficiaries to take full advantage of the opportunities
offered by credit unions and advice agencies working together in partnership.
Since the SCU-MAP project ended, BAC has become increasingly involved in the
Southwark Financial Inclusion Forum, in which SCU also participates, and there are plans
for joint work on financial skills for life and financial literacy work along with other
agencies in the borough.
Organisations need to be
able to develop
Developing a strategic approach
relationships with each
The SCU-MAP project was built on a vision of developing a holistic approach to financial
inclusion. However, due to a range of organisational difficulties, this vision was not fully
communicated throughout both organisations and the strategies required to achieve that
vision in practice were only partially developed. The result was that the project did not, in the
end, become fully integrated into an inter-agency strategic plan for tackling
overindebtedness and financial exclusion in Southwark.
other that are based on a
common purpose, which
is then seen to result in
benefits that are visible
and unambiguous for
themselves, for partner
organisations, and for
end-user beneficiaries.
For participants and stakeholders, this missed opportunity highlighted the central importance
of developing a strategic and planned approach if credit unions and advice agencies are to
work successfully together. Reports from elsewhere (Jones and Rahilly 2006) confirm that
successful partnerships depend ultimately on high-quality strategic planning and the
development of realistic and robust actions plans.
Organisations need to be able to develop relationships with each other that are based on a
common purpose, which is then seen to result in benefits that are visible and unambiguous
for themselves, for partner organisations, and for end-user beneficiaries. These benefits often
only become evident when measured against clear and measurable strategic targets set out
in action plans that can be monitored and controlled (Jones 2005).
It could be argued that the strategic vision of the project was compromised by its primary
focus on debt advice and access to loans. For the most part, debt advisers viewed the credit
union as a lending organisation and often failed to grasp its wider role in promoting financial
inclusion through savings accounts, transaction accounts and access to insurance. A greater
understanding of credit union products and services might have opened up the project not
just to debt advisers but to generalist, housing and welfare benefits advisers at BAC as well.
Stakeholders noted, for example, in the roundtable discussion, that there were instances of
advice agencies working with credit unions elsewhere that focused not so much on referring
people in debt but rather on referring a wider range of people more generally that were
in need of accessible financial services. One example was given of CAB advisers referring
new immigrants who otherwise would have had difficulties in opening bank accounts to a
credit union.
One dilemma for credit unions that surfaced during the project, although not unique to
SCU-MAP and which indeed applies to all credit unions operating in the low-income market,
is the importance of developing strategies to tackle financial exclusion without becoming
regarded as primarily a “poor persons’ bank”. The label of being a banking service for poor
people not only militates against attracting a diverse membership, which is key to the
54
jmu_64p
21/4/08
16:48
Page 55
financial security of credit unions as commercial entities (Goth et al. 2006, McKillop et al.
2007), but also results in the credit union becoming unattractive to poor people themselves.
Research has revealed that avoiding the stigmatisation of customers is critical to operating
successfully in the low-income market (Jones 2001). The challenge for a credit union in
working closely with an advice agency is to ensure that it retains its image of serving both
middle and lower-income members equally.
Managing partnership working
Partnership working
requires the nomination
of a staff member of
relative seniority in each
organisation to ensure
that the partnership is
taken forward
successfully.
Comparing the Southwark money advice project with credit union and advice agency
relationships elsewhere (Jones and Rahilly 2006), it is clear that partnerships can choose from
among a range of organisational models and structures. These range from those based, as in
Southwark, on strong notions of independence to those based on more fluid forms of
inter-dependence. Some partnerships tend to be flexible and informal, while others are more
structured and formal. Project analysis and consultations with stakeholders suggested that
there is no single right or wrong approach to partnership working, and indicated that each
initiative is forged in particular circumstances, dependent on the values, interests and goals
of the particular participating organisations.
Reflections on SCU-MAP identified a series of elements that underpin success irrespective of
the model of partnership working adopted. These are:• The commitment of the board or trustees of participating organisations to
partnership working. Evidence from projects elsewhere suggests that long-term
success depends on the support of respective boards of management or trustees.
Partnerships perform well where boards and trustees regard the partnership as a key
element in a strategic approach to tackle over-indebtedness and financial exclusion
(cf. ABCUL/Citizens Advice CONNECT project 2008). Some partnership projects
reported the value of having representatives of partner agencies reciprocally
represented on each board.
• The engagement of both senior and operational staff in the partnership. It was
evident in relation to the SCU-MAP project that success depends ultimately on the
vision, direction and control that senior management bring to a project, which can
then result in good referral practice.
• The leadership of a named person responsible for partnership liaison in each
participating organisation. It was clear that partnership working requires the
nomination of a staff member of relative seniority in each organisation to ensure that
the partnership is taken forward successfully. Otherwise, with the pressure of other
commitments, a project can lose its priority among the competing agendas of busy
organisations. SCU-MAP provided clear evidence that unless a project is embedded
within the structure of participating organisations, it will be particularly vulnerable
when key staff members leave.
• A clear statement of the strategic direction, mission, goals and purpose of the
partnership. A clear analysis of the strategic significance of the project is required in
each partner organisation in response to the defined needs of potential beneficiary
groups. Evidence from partner projects elsewhere confirmed the importance of an
inter-agency integrated approach to strategic planning, preferably within the wider
context of a financial inclusion strategy for a neighbourhood or borough.
Partnership working needs to connect to the bigger picture, building links and
networks based on access to financial services, money and debt advice, generic
financial advice and financial capability initiatives. Integrating the value of income
maximisation within a partnership approach is particularly important.
55
jmu_64p
21/4/08
16:48
Page 56
• Actions to promote partnerships and their services among external organisations.
Promoting the benefits of partnership activities particularly to/via community
outreach services is particularly important.
• A clear definition of roles and responsibilities in written protocols, operational
procedures, service level agreements and terms of reference. It is important that
agreed terms of reference and working principles are formulated in a statement of
common understanding, as this will help ensure that partnership working is embedded
within organisational practices and will survive over time.
• Ongoing staff training and education. Partner organisations need to take action to
ensure that the principles and practice of partnership working are embedded within
their organisational cultures and operations and understood clearly by staff members.
Partnership working
involves a commitment
to the resolution of
complex and contested
issues in a way that
does not undermine the
partnership and
compromise its wider
mission.
• Regular communication throughout partner organisations. Success in partnership
working involves regular communication with staff members, both within and
between partner organisations. Successful partnerships have prioritised regular jointagency meetings and set time aside for a partnership project slot at staff meetings.
• Monitoring and evaluation. Best practice in partnership working depends on learning
from experience. This involves some form of monitoring and feedback on referrals in
order to ensure that they are appropriate and in the best interests of members and
clients. Regular monitoring and evaluation assists the revision of policies, procedures
and protocols and offers the opportunity to tackle capacity issues in all the partner
organisations. It also supports a positive approach to development and change within
the partnership, bringing in new services and new partners as required.
• The acceptance and management of complex and contested issues. Partnership
working involves a commitment to the resolution of complex and contested issues in a
way that does not undermine the partnership and compromise its wider mission.
• Joint action on ongoing funding. Good management includes joint action to identify
future ongoing external funding and support in order to ensure project sustainability.
Overcoming barriers
The SCU-MAP project revealed the complexities and barriers that credit unions and money
advice agencies face when developing partnership working. As has been outlined in this
report, some of these arise from the principles, basic assumptions and organisational culture
of the respective sectors and agencies involved, whilst others emerge from more practical
considerations. These latter, many of them noted in the previous section, can be overcome, as
in any partnership project through good management, leadership and the availability of
relevant resources. The former, more fundamental issues are by definition more problematic.
However, in research consultations, participants considered that there were potential ways
forward in all the key relevant areas.
Many of the more complex issues have already been explored in this report, and ways to
overcome the barriers that they present have included considerations of the following:• The issue of independence. Independence is an issue for both advice agencies and
credit unions. However, there are different models of partnership working, from close
co-operation of services to more independent formal relationships. Adopting a
partnership model that both organisations are comfortable with is the first step to
overcoming concerns about organisational independence. For advice agencies, it is a
matter of basic ‘best interests of client’ principle that they do not, and cannot, be
perceived to favour any particular referral agency.
56
jmu_64p
21/4/08
16:48
Page 57
Many advice agencies have found that they are able to work with a credit union while
retaining independence, so long as they make it clear that they are not acting as an
agent for a credit union, they ensure clients are aware of the advantages and
disadvantages of credit union membership, and they offer information about the
credit union in the context of all other options open to the client. Credit union
independence is ensured when agencies recognise, and inform clients, that the credit
union takes all responsibility for the granting of loans and the opening of accounts and
that a referral to a credit union does not automatically entail immediate access to
financial services.
The project revealed
that barriers can be
surmounted if credit
unions and advice
agencies are transparent
in their dealings with
one another, endeavour
to develop trust and
understanding, and
ensure that the interests
of beneficiaries remain
paramount.
• Advice agencies and referrals to a financial institution. The research findings
pointed to particular complexities that advice agencies sometimes face in making a
referral to specific, i.e. nominated, financial institutions. Not only were there concerns
about the financial promotions regime (see Managing Referrals above), but some
advisers felt uncomfortable about recommending an organisation that might become
a future creditor of a client. Given the provisos noted in regard to independence above,
advice agencies should have no problem in suggesting a credit union to a client so
long as it can be shown that this is in the best interests of the client (OFT 2001).
Financially excluded clients have limited choices in relation to access to financial
services and advisers need to ensure that concerns about recommending a financial
institution do not lead to greater overall financial exclusion on the part of their clients.
• Borrowing one’s way out of debt. For many money advisers it is axiomatic that
overindebted clients should never borrow more money either to pay off debts or to
fund other financial needs. For the most part, this is a fundamental element of debt
advice and appropriate in most circumstances. However, equally, many advisers
working in the financially excluded ‘market’ recognise that a strict application of
this principle may not be in the best interests of clients. For example, such an
approach rules out of bounds any repayment of outstanding commitments by means
of taking out credit union loans, despite the fact that this can be, in certain
circumstances, a very successful tactic (see Jones 2008b). Taking out a credit union
loan may be an individual’s best option in preference to resorting to high-cost
alternative lenders.
Another possible barrier to partnership working, which was noted in stakeholder discussions
albeit not arising directly from the project, was the use by credit unions of the Eligible Loans
Deductions Scheme. Under this DWP scheme, credit unions are able to register with the DWP
so that, within certain limitations, they can apply for deductions from certain prescribed
welfare benefits awards of members who default on their loans. The aim of the scheme is to
encourage credit unions to make loans otherwise judged to be risky.
However, advisers considered that this “risked ratcheting the temperature up a bit” as it made
credit union loans potentially different from other commercial loans. In money advice
parlance, it gives credit union debts, which are non-priority, the effective status of priority
debts, which in turn sets a precedent. In the end, this may be one of the issues on which credit
unions and advice agencies fail to agree, but given the fact that only about forty credit unions
nationwide have signed up for the ELDS, it is not likely to have an immense impact on
partnership working in practice.
For the most part, the project revealed that barriers can be surmounted if credit unions and
advice agencies are transparent in their dealings with one another, endeavour to develop
trust and understanding, and ensure that the interests of beneficiaries remain paramount.
Of course, it is deciding where the best interests of the client or member lie that brings up
issues of the ‘devil’s detail’.
57
jmu_64p
21/4/08
16:48
Page 58
One example of likely credit union and advice agency divergence of opinion concerns the
priority that some credit unions wish to be given to the repayment of credit union loans, even
in cases of financial hardship. This issue did not arise in the course of the SCU-MAP project,
but has occurred elsewhere, particularly in situations where advice agencies recommend and
make referrals to credit unions. In cases of default, the fact that a credit union loan is a nonpriority debt can be difficult for some credit unions to accept, since they may consider that
continuing to pay the loan keeps open a line of credit for members, which is a basic financial
inclusion issue and ultimately in the best interests of the member.
Project consultations
pointed to the importance
of having access to better
information resources for
advice agencies and
credit unions entering
into partnership
arrangements.
Defaulting on a credit union loan would close the line of credit to the member, leaving the
person, when in credit need, with little option but to return to high-cost lenders. In Scotland,
there was even a move to obtain an amendment to legislation in regard to provisions relating
to protected trust deeds. It was argued by some credit unions that it was advantageous, both
for members and for the long-term stability of credit unions, if a debt to a credit union became
preferred in a protected trust deed or if the debt was not dischargeable by sequestration,
(giving it equal status with a student loan) (SG 2007). However, this move was understood,
but not supported, by ABCUL and was ultimately unsuccessful. Clearly, any partnership
agreement relating to how to deal with referred clients who default on loans to the credit
union (see section 6 on Managing Referrals), must first address any priority debts of the client.
Project consultations pointed to the importance of having access to more and better
information resources for advice agencies and credit unions entering into partnership
arrangements, which would assist them in understanding the issues concerned and agreeing
ways of overcoming barriers to collective working in advance. A series of questions were
identified in the course of the project evaluation and it is suggested that they might be of use
to advice agencies and credit unions as a checklist to use in preparation for developing
partnership arrangements. These can be found in Appendix 1 of this report.
Since the end of SCU-MAP, the Citizens Advice and ABCUL CONNECT project has developed
a range of information resource sheets and a best practice guidelines toolkit for Citizens
Advice Bureaux and credit unions (ABCUL 2008). These are based in part on some of the
learning that has emerged out of the SCU-MAP project.
58
jmu_64p
21/4/08
16:48
Page 59
7
Conclusion
The SCU-MAP project was a pilot initiative located in a new and significant area of financial
inclusion policy and practice. When it was conceived in 2005, there were few formal
partnership arrangements that existed between credit unions and advice agencies. SCU-MAP
succeeded in offering a new service to its beneficiaries and creating the beginning of a new
understanding between the credit union and money advice sectors. Importantly, the
reflections and discussions it provoked were able to generate a body of knowledge on credit
unions and advice agencies working together. It revealed some of the complexities and
dilemmas that money advice agencies and credit unions face, but also indicated how issues
could be resolved to the benefit of existing and future partnership projects. It was able to
inform national thinking in this area (ABCUL 2008).
The challenge for all
partnership projects is to
ensure that the linking up
of credit unions and
advice agencies is built
upon a shared
understanding of the
overall benefits of an
integrated approach to
financial inclusion.
The driver for the project, as for similar projects since, was the opportunity it afforded for
developing a joined-up, holistic approach to tackling overindebtedness and financial
exclusion. Despite the difficulties and challenges, the project confirmed the importance of a
strategic, collaborative approach both for credit unions and for advice agencies. Partnership
working is potentially a win-win situation all round. It adds value to credit union service
delivery, affords greater rewards for money and debt advisers, and offers the opportunity of
greater long-term financial stability to beneficiaries.
Yet the challenge for all partnership projects is to ensure that the linking up of credit unions
and advice agencies is built upon a shared understanding of the overall benefits of an
integrated approach to financial inclusion. Money and debt advice, together with access to
affordable financial services, needs to be linked with access to generic money advice, financial
capability work, income maximisation measures and money management programmes.
The related challenge, of course, for organisations acting in this area is for partnership
programmes to be led and managed well. At the heart of all effective partnership projects are
effective and efficient referral policies and practice.
Even with its limitations, the SCU-MAP project carried out the important function of
highlighting the need for well considered and well subsidised longer-term initiatives if credit
unions and advice agencies are going to respond effectively and lastingly to the needs of
overindebted and financially excluded individuals and communities. Collard et al. (2003)
have revealed the importance to low-income consumers of having access to locally-based
community organisations. Credit unions and advice agencies can offer that local access and
effectively reach out in the longer term to those excluded from mainstream financial services.
But to do that, they need resources.
It is worth remembering that the SCU-MAP project was established with only £15k of financial
investment. This supported the delivery of a twelve-month pilot project which, with
operational start-up time factored in, only functioned for a ten-month period. When seed-corn
funding ended, so did the project, as there were no funds available from the core budgets of the
participating organisations to sustain services. In the ten-month period, however, the project
was able to enhance knowledge of effective practice in this area, on which future partnership
programmes can be and are being built. New initiatives are emerging nationwide through, for
example, the Citizens Advice and ABCUL CONNECT programme (ABCUL 2008).
In the wider advice sector, too, there are new initiatives linking up advice agencies and credit
unions. BAC, alongside SCU, is part of the Southwark Financial Inclusion Forum, (one of
around a dozen across England and Wales) which is planning new partnership initiatives in
the area of financial capability education.
Long-term solutions will, however, depend on continuing external financial support, whether
from Government, charitable trusts or the private sector. There is much ‘to play for’ and it is
sincerely hoped that this project will support the argument for further resourcing of
cost-effective initiatives that have a key role to play in meeting the financial inclusion needs
of individuals and communities throughout Great Britain.
59
jmu_64p
21/4/08
16:48
Page 60
References
ABCUL, 2004. An introduction to PEARLS in Britain. ABCUL, Manchester
ABCUL, 2008. Joining it all up: The CONNECT project guide to local financial inclusion
partnerships between Citizens Advice Bureaux and Credit Unions. ABCUL, Manchester.
Brown, J. Thomas, W., 2005. Basic bank accounts: The case for a universal service obligation.
A NEF discussion paper. New Economics Foundation, London.
Brown, M. Conaty, P., Mayo, E., 2003. Life Saving: Community Development Credit Unions,
NACUW and the New Economics Foundation, London.
Carbó, S., Gardner, E., Molyneux, P., 2005. Financial Exclusion. Palgrave, Macmillan.
Citizens Advice, 2006, Citizens Advice Bureaux team up with credit unions to tackle debt
and financial exclusion, Press Statement, http://www.citizensadvice.org.uk/press_060920
Citizens Advice, 2007, Citizens Advice Moneyplan project. Citizens Advice, London
Collard, S., Kempson, E., 2005. Affordable credit: The way forward. The Policy Press, UK
Collard, S., Kempson, E., Dominy, E., 2003. Promoting financial inclusion: An assessment of
initiatives using a community select committee approach. The Policy Press, UK
Collard, S., Smith N., 2006. Membership Counts: Who uses credit unions? Personal Finance
Research Institute and ABCUL, UK
Decker S. and Jones P.A., 2007. The Development of Southwark Credit Union, 1982 – 2007.
Liverpool John Moores University
Demirgüç-Kunt A., Beck T., Honohan P., 2008. Finance for all? Policies and Pitfalls in
Expanding Access. World Bank, Washington, D.C.
D’Arcy C. 2006, paper on Motley Fool http://www.fool.co.uk/news/get-out-ofdebt/2006/07/31/borrow-enough-to-get-out-of-debt.aspx
DWP, 2006. Statutory Instrument No.3188. The Social Security (Claims and Payments)
Amendment (No. 2) Regulations 2006. DWP. London
FSA. 2004. Building Financial Capability in the UK: the role of advice. Financial Services
Authority, London
FSA. 2005. Financial Capability: developing the role of generic financial advice. Financial
Services Authority, London
FSA. 2007. New Conduct of Business Sourcebook , Financial Services Authority, London
Goth, P., McKillop, D.G., and Ferguson, C., 2006. Building Better Credit Unions. Joseph
Rowntree Foundation, York, UK.
Herbert, T., Hopwood Road, F., 2006, Banking Benefits: CAB evidence on payment of
benefits into bank accounts. Citizens Advice, London.
HM Treasury, 1999. Credit Unions of the Future: Credit Union Taskforce Report. HM Treasury,
London.
HM Treasury, 2002. The Financial Services and Markets Act 2000 (Consequential
Amendments and Transitional Provisions) (Credit Unions) Order 2002, The Stationery Office
Ltd. London
HM Treasury, 2004a. Promoting Financial Inclusion. HM Treasury, London.
HM Treasury, 2004b. Financial Services and Markets Act two year review: changes to
secondary legislation Volume One. Proposals for Change HM Treasury 2004a
60
jmu_64p
21/4/08
16:48
Page 61
HM Treasury, 2004c. Financial Services and Markets Act two year review: Changes to
secondary legislation Government response. HM Treasury.
HM Treasury, 2004d. Statement by the Financial Secretary to the Treasury: Stephen Timms.
Two-Year Review of the Financial Services and Markets Act 2000, December
HM Treasury, 2005. The Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005
HM Treasury, 2007. Financial Inclusion: the way forward. HM Treasury, London.
HM Treasury, 2008. The Thoresen Review HM Treasury, London.
House of Commons Treasury Committee, 2006a. Financial inclusion: credit, savings, advice
and insurance: Twelfth Report of Session 2005–06.Vol. I. The Stationery Office, London.
House of Commons Treasury Committee, 2006b. Banking the unbanked: banking services,
the post office card account, and financial inclusion: Thirteenth Report of Session 2005–06
Vo. 2. The Stationery Office, London.
House of Commons Treasury Committee, 2007b. Financial inclusion follow–up: saving for all
and shorter term saving products HM Treasury, London
Jones, P.A., 2001. Access to Credit on a Low Income: a study into how people on low incomes
in Liverpool access and use consumer credit. The Co-operative Bank. Manchester
Jones, P.A., 2003. Credit Unions and Loan Guarantee Schemes. Barclays. London.
Jones, P.A., 2005. Creating Wealth in the West Midlands through Sustainable Credit Unions.
ABCUL, Manchester.
Jones P.A., 2006 Giving credit where it’s due: Promoting financial inclusion through quality
credit unions. Local Economy, Volume 21, Number 1, Pages: 36 – 48, Routledge.
Jones P.A., 2008. Borrowing your way out of debt. Liverpool John Moores University.
Jones, P.A., Barnes T., 2005. Would You Credit It: people telling stories about credit.
The Co-operative Bank, Manchester
Jones, P.A., Rahilly, S., 2006. Enterprise in Disadvantaged Communities, Liverpool John
Moores University, Liverpool.
Kempson, E., 1996. Life on a Low Income. Joseph Rowntree Foundation, UK
Kempson, E., 2002. Over indebtedness in Britain. Department of Trade and Industry, London.
Kober C., Paxton W., 2002. Asset-based welfare and poverty. Exploring the case for and
against asset-based welfare policies. ippr. London.
McKillop, D.G., Ward, A-M., Wilson, J.O.S., 2007. The Development of Credit Unions and
Their Role in Tackling Financial Inclusion, Public Money and Management. Feb. pp. 37-44.
Nixon J., Hunter C., 1996. Journal of Housing and the Built Environment, Springer
Noble M., McLennan D., Wilkinson K., Whitworth A., and Barnes H., and Dibben C., 2008.
The English Indices of Deprivation 2007, Communities and Local Government. London
Office of Fair Trading. 2001. Debt Management Guidance, PFT, London
Pawson, H., Flint J., Scott S., Atkinson R., Bannister J., McKenzie C. and Mills C., The Use of
Possession Actions and Evictions by Social Landlords. Office of the Deputy Prime Minister.
London
Pearson N. 2004. Advice UK Response to the Financial Services and Markets Act two year
review: changes to secondary legislation.
http://www.hm-treasury.gov.uk/media/8/0/FSMA_2_yr_review_Advice_UK_20040514.pdf
61
jmu_64p
21/4/08
16:48
Page 62
Pleasence P, Buck A, Balmer N.J. 2006. and Williams K A Helping Hand - The Impact of Debt
Advice on People’s Lives. Legal Services Commission, London
Scottish Government, 2007. Supplementary public consultation on special protection for
debts owed to Credit Unions in Protected Trust Deeds. Edinburgh
Sherraden, M., 1991. Assets and the Poor: A New American Welfare Policy. M.E. Sharpe
Southwark Council. 2007. Equality Impact Assessment of Southwark’s Children and Young
People’s plan available at www.southwark.org/uploads/FILE20391.doc.
Terry, Sinn and Simpson. 2006. Life after debt, residents, social landlords and financial
inclusion, Chartered Institute of Housing.
62
jmu_64p
21/4/08
16:48
Page 63
Appendix 1
Developing a partnership – a checklist for credit unions and
money advice agencies.
This series of questions were identified in the course of the project evaluation and it is
suggested that they might be of use to advice agencies and credit unions as a checklist to use
in preparation for developing partnership arrangements.
Why develop a money advice / credit union partnership?
• What is the vision of the partnership?
• What is the strategic purpose of our working together in partnership?
• How will working together combat overindebtedness and promote financial
inclusion?
• What do we mean by a partnership? How is it more than just working together, ie
more than the sum of its parts?
• What are the values and principles that our organisations share? Are there any that
are different?
• What priorities do we share? Are there any that are different?
• What are the likely difficult or contested issues in partnership working? How are we
going to surmount them?
How to develop a money advice / credit union partnership
• What commitment to the partnership is there from the board or trustees of each
organisation?
• How does the partnership relate to the strategic development of each organisation?
• What model of partnership working will be adopted? Is it one based on close working
practices or on a more arms-length foundation?
• What management systems do we need to put in place?
• What resource implications are there in developing a partnership?
• What financial commitments are required and how will these be met?
• Who will be responsible for the operation of the partnership?
• How will partner organisations liaise?
• What protocol, memorandum of understanding or service level agreement do we
need to have in place? Do these need to be in writing and agreed by the board,
trustees or senior management of the participating organisations?
• Do we have a plan of action? How will this be developed?
• How will we promote the partnership while retaining organisational independence?
• Do we need to involve anyone else in the partnership? If so, in what capacity referral agency, advisory body etc?
63
jmu_64p
21/4/08
16:48
Page 64
Managing referrals
• Have we agreed what we mean by a referral? How does this differ from a
recommendation or signposting?
• What are the practical issues in relation to managing referrals?
• Will we need a written policy on referral practice?
• How will we manage issues around capacity and the making of appropriate
referrals?
• What do staff members need to know to manage referrals competently?
• What referral monitoring or evaluation systems will we need to put in place?
Staff training and development
• What training/induction/briefing/promotion in the two organisations is required,
and at what levels?
• How will partnership working be linked to staff development?
• What joint training is required?
• How do we plan to link training to effective service delivery?
• Do we know the kinds of training that are available? How will we find out?
• How can national trade associations or membership bodies help in supporting the
partnership?
Research Unit for Financial Inclusion
Paul A Jones is a senior researcher in the Research Unit for Financial Inclusion. His research
interests are in the fields of credit union development, co-operative and social enterprise,
money and debt advice and financial services for people on low incomes.
The Research Unit for Financial Inclusion (RUFI) is situated within the Faculty of Health and
Applied Social Sciences at Liverpool John Moores University. It undertakes academic, action
and evaluative research in a wide range of areas related to the development of financial
services for lower income households. RUFI has a particular expertise in research aimed at
strengthening credit union capacity and effectiveness.
For further information on RUFI see
http://www.ljmu.ac.uk/HEA/financialinclusion/index.ht
64
jmu_cover
21/4/08
16:47
Page 4
Research Unit for Financial Inclusion
Faculty of Health and Applied Social Sciences
Liverpool John Moores University
Rodney House, 70 Mount Pleasant, Liverpool, L3 5UX
www.ljmu.ac.uk
ISBN 978-0-9553997-9-4
jmu_cover
21/4/08
16:47
Page 1